Sprint Nextel Reports Fourth Quarter and Full Year 2012 Results

  • Full year 2012 consolidated net operating revenue of $35.3 billion rose 5 percent year-over-year; annual Sprint platform wireless service revenue of $27.1 billion is the highest ever and increased nearly 15 percent year-over-year; record 2012 Sprint platform postpaid ARPU of $63.05 grew more than 5 percent over 2011
  • Annual Operating Loss of $1.8 billion, includes accelerated depreciation of $2.1 billion; annual Adjusted OIBDA* of $4.8 billion; fourth quarter Adjusted OIBDA* of $860 million up 2 percent year-over-year
  • 2012 Sprint platform postpaid net additions up 18 percent year-over-year and highest since 2007
  • Strong postpaid and prepaid Nextel recapture rates
    • 2012 postpaid recapture rate of 55 percent
    • Fourth quarter postpaid recapture rate of 51 percent
    • Best ever quarterly prepaid recapture rate of 50 percent
  • Annual smartphone sales of nearly 20 million
    • 2012 iPhone ® sales of more than 6.6 million - 40 percent to new customers
    • Best ever quarterly iPhone sales of approximately 2.2 million - 38 percent to new customers
    • 89 percent of quarterly Sprint platform postpaid handset sales were smartphones
  • Network Vision sites on air nearly doubled in last 90 days
    • 4G LTE now launched in 58 cities with nearly 170 more expected in coming months
    • Construction started in more than 450 cities
    • More than 19,500 sites now ready for construction
    • Average current new sites on air per week have grown 83 percent from third quarter
    • More than 8,000 sites on air

The company's fourth quarter 2012 earnings conference call will be held at 8 a.m. ET today. Participants may dial 800-938-1120 in the U.S. or Canada (706-634-7849 internationally) and provide the following ID: 87240993 or may listen via the Internet at www.sprint.com/investors .


Additional information about results can be found in the "Quarterly Investor Update" posted on our Investor Relations website at www.sprint.com/investors .

OVERLAND PARK, Kan.--(BUSINESS WIRE)-- 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'sannual 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.

CAPITAL STRUCTURE

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.

FORECAST

The company expects 2013 Adjusted OIBDA* to be between $5.2 billion and $5.5 billion.

             
Wireless Operating Statistics (Unaudited)
Quarter To Date Year To Date
12/31/12     9/30/12     12/31/11   12/31/12     12/31/11  
Net Additions (Losses) (in thousands)
Sprint platform:

Postpaid(2)

401 410 539 1,516 1,283

Prepaid(3)

525 459 899 2,305 4,293

Wholesale and affiliate

  (243 )   14     954   944     2,697  
Total Sprint platform 683 883 2,392 4,765 8,273
Nextel platform:

Postpaid(2)

(644 ) (866 ) (378 ) (2,653 ) (1,381 )

Prepaid(3)

  (376 )   (440 )   (392 ) (1,507 )   (1,781 )
Total Nextel platform (1,020 ) (1,306 ) (770 ) (4,160 ) (3,162 )
 
Total retail postpaid net (losses) additions (243 ) (456 ) 161 (1,137 ) (98 )
Total retail prepaid net additions 149 19 507 798 2,512
Total wholesale and affiliate net (losses) additions   (243 )   14     954   944     2,697  
Total Wireless Net (Losses) Additions   (337 )   (423 )   1,622   605     5,111  
 
End of Period Subscribers (in thousands)
Sprint platform:

Postpaid(2)

30,245 29,844 28,729 30,245 28,729

Prepaid(3)

15,133 14,608 12,828 15,133 12,828
Wholesale and affiliate   8,162     8,405     7,218   8,162     7,218  
Total Sprint platform 53,540 52,857 48,775 53,540 48,775
Nextel platform:

Postpaid(2)

1,632 2,276 4,285 1,632 4,285

Prepaid(3)

  454     830     1,961   454     1,961  
Total Nextel platform 2,086 3,106 6,246 2,086 6,246
 
Total retail postpaid end of period subscribers 31,877 32,120 33,014 31,877 33,014
Total retail prepaid end of period subscribers 15,587 15,438 14,789 15,587 14,789
Total wholesale and affiliate end of period subscribers   8,162     8,405     7,218   8,162     7,218  
Total End of Period Subscribers   55,626     55,963     55,021   55,626     55,021  
 
Supplemental Data - Connected Devices
End of Period Subscribers (in thousands)
Retail postpaid 813 817 783 813 783
Wholesale and affiliate   2,670     2,542     2,077   2,670     2,077  
Total   3,483     3,359     2,860   3,483     2,860  
 
Churn
Sprint platform:
Postpaid 1.98 % 1.88 % 1.99 % 1.89 % 1.85 %
Prepaid 3.02 % 2.93 % 3.07 % 3.01 % 3.28 %
Nextel platform:
Postpaid 5.27 % 4.38 % 1.89 % 3.24 % 1.92 %
Prepaid 9.79 % 9.39 % 7.18 % 8.55 % 7.10 %
 
Total retail postpaid churn 2.18 % 2.09 % 1.98 % 2.02 % 1.86 %
Total retail prepaid churn 3.30 % 3.37 % 3.68 % 3.45 % 4.05 %
 
ARPU (a)
Sprint platform:
Postpaid $ 63.04 $ 63.21 $ 61.22 $ 63.05 $ 59.76
Prepaid $ 26.30 $ 26.19 $ 25.16 $ 25.92 $ 25.43
Nextel platform:
Postpaid $ 37.27 $ 38.65 $ 41.91 $ 39.65 $ 43.25
Prepaid $ 35.59 $ 34.73 $ 34.91 $ 35.91 $ 35.17
 
Total retail postpaid ARPU $ 61.47 $ 61.18 $ 58.59 $ 60.84 $ 57.27
Total retail prepaid ARPU $ 26.69 $ 26.77 $ 26.62 $ 26.72 $ 27.40
 
Nextel Platform Subscriber Recaptures
Subscribers (in thousands) (4):
Postpaid 333 516 168 1,508 508
Prepaid 188 152 152 620 724
Rate (5):
Postpaid 51 % 59 % 39 % 55 % 30 %
Prepaid 50 % 34 % 25 % 33 % 24 %

 

(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.

             
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

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