Sprint Nextel Corp. (NYSE: S) today reported fourth quarter
consolidated net operating revenue of $9 billion and full year 2012
consolidated net operating revenue of $35.3 billion. Sprint reported
record quarterly and annual Sprint platform wireless service revenues of
nearly $7 billion and $27.1 billion, respectively. Driven by increasing
postpaid ARPU and continued Sprint platform subscriber growth, wireless
service revenues for the Sprint platform grew 12 percent year-over-year
for the quarter and nearly 15 percent for the full year.
The company reported a net loss of $1.3 billion and a diluted net loss
of $.44 per share for the fourth quarter of 2012 as compared to a net
loss of $1.3 billion and a diluted net loss of $.43 per share in the
fourth quarter of 2011. Sprint's fourth quarter 2012 results include
accelerated depreciation of approximately $400 million, or negative $.13
per share (pre-tax), primarily related to Network Vision, including the
expected shutdown of the Nextel platform, and $45 million or negative
$.01 per share (pre-tax) related to impacts from Hurricane Sandy.
The Sprint platform postpaid subscriber base grew for the eleventh
consecutive quarter, with net additions of 401,000 driven by a postpaid
Nextel recapture rate of 51 percent, or 333,000 subscribers, and strong
4G LTE smartphone sales. Sprint platform prepaid net additions equaled
525,000 due in part to the best ever quarterly prepaid Nextel recapture
rate of 50 percent, or 188,000 subscribers. Sprint sold approximately
2.2 million iPhones in the fourth quarter with 38 percent purchased by
new customers. As of the end of the fourth quarter, Sprint had sold more
than 4 million 4G LTE smartphones.
"Sprint's strong performance was fueled by record wireless service
revenue on the Sprint platform due to year-over-year postpaid ARPU
growth and Sprint platform net additions," said Dan Hesse, Sprint CEO.
"As a result, quarterly Adjusted OIBDA* performance improved
year-over-year in spite of significant cost increases related to Network
Vision and the iPhone, both of which are key investments for our
business that we expect will improve the customer experience and lead to
growth in the years ahead."
NETWORK VISION HIGHLIGHTS
Sprint continues to make significant progress on Network Vision
deployment. The number of sites that are either ready for construction
or already underway has grown to more than 19,500 - approximately half
the total number of sites to be upgraded. To date more than 8,000 sites
are on air and meeting speed and coverage enhancement targets. Recent
weekly construction starts are up 56 percent from the third quarter.
Sprint continues to expect to have 12,000 sites on air by the end of the
first quarter of 2013.
As part of Network Vision, Sprint has launched 4G LTE in 58 cities and
expects that 4G LTE will be available in nearly 170 additional cities in
the coming months. During 2012 Sprint launched 15 4G LTE devices
including Apple iPad mini and iPad with Retina Display, LG Optimus G™
and Samsung Galaxy Note® II in the fourth quarter.
CUSTOMER EXPERIENCE AND BRAND HIGHLIGHTS
During the fourth quarter, Sprint received the Frost & Sullivan North
American Customer Value Enhancement Award in Mobile Communications and
Collaboration. Sprint was also named to Connected World magazine's
annual list of the 100 most important and influential providers of
machine-to-machine services and is number 16 on Chief Executive
magazine's 2013 Best Companies for Leaders list. For the fourth straight
year, Newsweek's annual Green Rankings recognized Sprint as one
of the greenest companies in the U.S., ranking the company third among
the greenest companies in America in its 2012 report. Finally, the
Global Reporting Initiative verified Sprint is the first U.S. telecom
company to deliver an "A+" Corporate Responsibility Performance Report.
During the fourth quarter, Sprint introduced a variety of products and
services that benefit customers across its brands. Sprint launched
Pinsight Media+™, a new advertising service that gives advertisers the
power to reach consumers on their mobile device in a more personalized
way. Sprint unveiled Sprint VelocitySM, a pioneering
capability that encompasses the development, integration and marketing
of in-vehicle communications systems. Automakers can use Sprint Velocity
as a complete turnkey solution or on a modular basis to suit their
customized needs. Sprint's Global Wholesale & Emerging Solutions group
introduced two new products: Sprint Phone Connect for Wholesale, a
plug-and-play device product that allows mobile virtual network
operators to provide their customers with a low-cost, high-quality home
phone service without the need for a landline or broadband service, and
Mobile Broadband on Demand, which allows international, retail, travel
and hospitality companies to generate new revenue streams through the
sale or rental of mobile broadband devices on Sprint's trusted networks.
Sprint's Assurance Wireless® brand for eligible
low-income consumers, launched service in Idaho and New Mexico in the
fourth quarter and its Virgin Mobile USA prepaid brand began offering
the award-winning Samsung Galaxy S® II 4G.
During the fourth quarter, Sprint raised additional debt financing of
nearly $2.3 billion and used the proceeds to retire nearly $1.2 billion
of 2014 debt maturities and more than $1.1 billion of 2015 maturities.
The remaining outstanding principal balances of Sprint's 2013, 2014 and
2015 maturities are $366 million, $247 million and $566 million,
respectively. Sprint also received $3.1 billion from SoftBank in
exchange for a newly issued 1 percent, seven-year convertible bond
related to the companies' pending merger.
As of December 31, 2012, the company's liquidity was approximately $9.5
billion consisting of $8.2 billion in cash, cash equivalents and
short-term investments and $1.3 billion of undrawn borrowing capacity
available under its revolving bank credit facility. Additionally, the
company has borrowed $296 million to-date of available funding under the
secured equipment credit facility, reducing the remaining undrawn
availability to $704 million. Sprint generated $216 million of cash flow
from operating activities and negative Free Cash Flow* of $1.3 billion
in the quarter.
The company expects 2013 Adjusted OIBDA* to be between $5.2 billion and
Wholesale and affiliate
(a) ARPU is calculated by dividing service revenue by the sum
of the average number of subscribers in the applicable service category.
Changes in average monthly service revenue reflect subscribers for
either the postpaid or prepaid service category who change rate plans,
the level of voice and data usage, the amount of service credits which
are offered to subscribers, plus the net effect of average monthly
revenue generated by new subscribers and deactivating subscribers.
Gains from asset dispositions and exchanges(9)
Spectrum hosting contract termination, net(11)
Net Increase (Decrease) in Cash, Cash Equivalents and
NOTES TO THE FINANCIAL INFORMATION (Unaudited)
(1) Capital expenditures is an accrual based amount that
includes the changes in unpaid capital expenditures and excludes
capitalized interest. Cash paid for capital expenditures includes total
capitalized interest of $9 million, $52 million and $278 million for the
fourth and third quarters and year-to-date periods of 2012,
respectively, and $109 million and $413 million for the fourth quarter
and year-to-date periods of 2011, and can be found in the Condensed
Consolidated Cash Flow Information and the Reconciliation to Free Cash
(2) Postpaid subscribers on the Sprint platform are defined
as retail postpaid subscribers on the CDMA network, including
subscribers with PowerSource devices, and those utilizing WiMax and LTE
technology. Postpaid subscribers on the Nextel platform are defined as
retail postpaid subscribers on the iDEN network.
(3) Prepaid subscribers on the Sprint platform are defined as
retail prepaid subscribers and session-based tablet users who utilize
CDMA and WiMax technology via our multi-brand offerings. Prepaid
subscribers on the Nextel platform are defined as retail prepaid
subscribers who utilize iDEN technology.
(4) Nextel Subscriber Recaptures are defined as the number of
subscribers that deactivated service from the postpaid or prepaid Nextel
platform, as applicable, during each period but remained with the
Company as subscribers on the postpaid or prepaid Sprint platform,
respectively. Subscribers that deactivate service from the Nextel
platform and activate service on the Sprint platform are included in the
Sprint platform net additions for the applicable period.
(5) The Postpaid and Prepaid Nextel Recapture Rates are
defined as the portion of total subscribers that left the postpaid or
prepaid Nextel platform, as applicable, during the period and were
retained on the postpaid or prepaid Sprint platform, respectively.
(6) The second quarter of 2012 includes a non-cash impairment
of $204 million to reflect a reduction of our investment in Clearwire to
its estimated fair value at June 30, 2012. The fourth quarter of 2011
includes a non-cash impairment of $135 million to reflect a reduction of
our investment in Clearwire to its estimated fair value at December 31,
2011, and a dilution loss of approximately $27 million associated with
the fourth quarter reduction of Sprint's economic interest from 53.5% to
51.5% as a result of Clearwire's fourth quarter 2011 equity offering.
(7) Results include pre-tax, non-cash "Equity in losses of
unconsolidated investments and other, net" of $140 million ($.05 per
share), $112 million ($.04 per share) and $923 million ($.31 per share)
in the fourth and third quarters and year-to-date periods of 2012,
respectively, and $472 million ($.16 per share) and $1.7 billion ($.58
per share) in the fourth quarter and year-to-date periods of 2011.
(8) For the fourth and third quarters and year-to-date
periods of 2012, lease exit costs are primarily associated with taking
Nextel platform sites off air. For the fourth quarter and year-to-date
periods of 2011, severance and exit costs are primarily related to work
force reductions, lease termination charges, and organizational
(9) For the year-to-date period of 2012, gains from asset
dispositions and exchanges are primarily due to spectrum exchange
(10) For the year-to-date period of 2012, asset impairments
and abandonments include $18 million related to a change in our backhaul
architecture in connection to our Network Vision design from microwave
to a more cost effective fiber backhaul. The remaining 2012 activity of
$18 million, as well as the year-to-date 2011 activity of $78 million,
is primarily related to network asset equipment in our Wireless segment,
no longer necessary for management's strategic plans.
(11) On March 16, 2012, we elected to terminate the
arrangement with LightSquared LP and LightSquared, Inc. (LightSquared).
As we have no future service obligations with respect to the arrangement
with LightSquared, we recognized $236 million of the advanced payments
as other operating income in the first quarter of 2012. As a result of
the termination of the hosting agreement, we impaired capitalized costs
specific to LightSquared's 1.6 GHz spectrum that the company no longer
intends to deploy which totaled $66 million.
(12) Favorable developments during the first quarter of 2012
relating to disagreements with local exchange carriers resulted in a
reduction in expected access costs of $17 million.
(13) For the fourth quarter and year-to-date periods of 2012,
included in selling, general and administrative expenses are fees paid
to unrelated parties necessary for the proposed transactions with
SoftBank and our acquisition of Clearwire.
(14) Hurricane Sandy charges for the fourth quarter and
year-to-date periods of 2012, represent estimated hurricane-related
charges of $45 million, consisting of customer credits, incremental
roaming costs, network repairs and replacements.
(15) $135 million in reimbursements were received in the
fourth quarter of 2011 from the mobile satellite service (MSS) entrants
for their pro rata share of our costs of clearing a portion of the 1.9
GHz spectrum related to spectrum reconfiguration under the FCC's Report
The Company had $1.3 billion of borrowing capacity available under our
revolving bank credit facility as of December 31, 2012. Our revolving
bank credit facility expires in October 2013.
In May 2012, certain of our subsidiaries entered into a $1.0 billion
secured equipment credit facility to finance equipment-related purchases
for Network Vision. The facility is equally divided into two consecutive
tranches of $500 million, with the drawdown availability contingent upon
Sprint's acquisition of equipment-related purchases from Ericsson, up to
the maximum of each tranche, ending on May 31, 2013 and May 31, 2014,
for the first and second tranche, respectively. Interest and principal
are payable semi-annually with a final maturity of March 2017 for both
Sprint Nextel provides financial measures determined in accordance with
accounting principles generally accepted in the United States (GAAP) and
adjusted GAAP (non-GAAP). The non-GAAP financial measures reflect
industry conventions, or standard measures of liquidity, profitability
or performance commonly used by the investment community for
comparability purposes. These measurements should be considered in
addition to, but not as a substitute for, financial information prepared
in accordance with GAAP. We have defined below each of the non-GAAP
measures we use, but these measures may not be synonymous to similar
measurement terms used by other companies.
Sprint Nextel provides reconciliations of these non-GAAP measures in its
financial reporting. Because Sprint Nextel does not predict special
items that might occur in the future, and our forecasts are developed at
a level of detail different than that used to prepare GAAP-based
financial measures, Sprint Nextel does not provide reconciliations to
GAAP of its forward-looking financial measures.
The measures used in this release include the following:
OIBDA is operating income/(loss) before depreciation and
amortization. Adjusted OIBDA is OIBDA excluding severance,
exit costs, and other special items. Adjusted OIBDA Margin
represents Adjusted OIBDA divided by non-equipment net operating
revenues for Wireless and Adjusted OIBDA divided by net operating
revenues for Wireline. We believe that Adjusted OIBDA and Adjusted OIBDA
Margin provide useful information to investors because they are an
indicator of the strength and performance of our ongoing business
operations, including our ability to fund discretionary spending such as
capital expenditures, spectrum acquisitions and other investments and
our ability to incur and service debt. While depreciation and
amortization are considered operating costs under GAAP, these expenses
primarily represent non-cash current period costs associated with the
use of long-lived tangible and definite-lived intangible assets.
Adjusted OIBDA and Adjusted OIBDA Margin are calculations commonly used
as a basis for investors, analysts and credit rating agencies to
evaluate and compare the periodic and future operating performance and
value of companies within the telecommunications industry.
Free Cash Flow is the cash provided by operating activities less
the cash used in investing activities other than short-term investments
and equity method investments during the period. We believe that Free
Cash Flow provides useful information to investors, analysts and our
management about the cash generated by our core operations after
interest and dividends, if any, and our ability to fund scheduled debt
maturities and other financing activities, including discretionary
refinancing and retirement of debt and purchase or sale of investments.
Net Debt is consolidated debt, including current maturities, less
cash and cash equivalents, short-term investments and if any, restricted
cash. We believe that Net Debt provides useful information to investors,
analysts and credit rating agencies about the capacity of the company to
reduce the debt load and improve its capital structure.
This release includes "forward-looking statements" within the meaning of
the securities laws. The words "may," "could," "should," "estimate,"
"project," "forecast," "intend," "expect," "anticipate," "believe,"
"target," "plan," "providing guidance," and similar expressions are
intended to identify information that is not historical in nature. All
statements that address operating performance, events or developments
that we expect or anticipate will occur in the future - including
statements relating to network performance, subscriber growth, and
liquidity, and statements expressing general views about future
operating results - are forward-looking statements. Forward-looking
statements are estimates and projections reflecting management's
judgment based on currently available information and involve a number
of risks and uncertainties that could cause actual results to differ
materially from those suggested by the forward-looking statements. With
respect to these forward-looking statements, management has made
assumptions regarding, among other things, development and deployment of
new technologies; efficiencies and cost savings of multimode
technologies; customer and network usage; customer growth and retention;
service, coverage and quality; availability of devices; the timing of
various events and the economic environment. Sprint Nextel believes
these forward-looking statements are reasonable; however, you should not
place undue reliance on forward-looking statements, which are based on
current expectations and speak only as of the date when made. Sprint
Nextel undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law. In addition,
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
our company's historical experience and our present expectations or
projections. Factors that might cause such differences include, but are
not limited to, those discussed in the company's Annual Report on Form
10-K for the year ended December 31, 2011 and Quarterly Reports on Form
10-Q for the quarter ended September 30, 2012, which are filed with the
U.S. Securities and Exchange Commission and are incorporated herein by
reference and when filed Part I, Item IA "Risk Factors" of our Annual
Report on Form 10-K for the year ended December 31, 2012. You should
understand that it is not possible to predict or identify all such
factors. Consequently, you should not consider any such list to be a
complete set of all potential risks or uncertainties.
Clearwire's fourth quarter 2012 results from operations have not yet
been finalized. As a result, the amount reflected for Sprint's share of
Clearwire's results of operations for the quarter and year-to-date ended
December 31, 2012, is an estimate and, based upon the finalization of
Clearwire's results, may need to be revised if our estimate materially
differs from Clearwire's actual results. Changes in our estimate, if
any, would affect the carrying value of our investment in Clearwire, net
loss, basic and diluted net loss per common share, and comprehensive
loss but would have no effect on Sprint's operating income, OIBDA*,
Adjusted OIBDA* or consolidated statement of cash flows.
About Sprint Nextel
Sprint Nextel offers a comprehensive range of wireless and wireline
communications services bringing the freedom of mobility to consumers,
businesses and government users. Sprint Nextel served more than 55
million customers at the end of 2012 and is widely recognized for
developing, engineering and deploying innovative technologies, including
the first wireless 4G service from a national carrier in the United
States; offering industry-leading mobile data services, leading prepaid
brands including Virgin Mobile USA, Boost Mobile, and Assurance
Wireless; instant national and international push-to-talk capabilities;
and a global Tier 1 Internet backbone. The American Customer
Satisfaction Index rated Sprint No. 1 among all national carriers in
customer satisfaction and most improved, across all 47 industries,
during the last four years. Newsweek ranked Sprint No. 3 in both
its 2011 and 2012 Green Rankings, listing it as one of the nation's
greenest companies, the highest of any telecommunications company. You
can learn more and visit Sprint at www.sprint.com
iPad and iPad mini are trademarks of Apple, Inc. LTE is a trademark of
ETSI. Other marks are the property of their respective owners.
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