Two of the country’s largest wireless operators saw their stock prices jolted last week, as financial and performance concerns continued to plague the telecommunications market.
Nextel Communications Inc.’s stock fell to a 52-week low of $20.62 per share last Tuesday, continuing its fall following the company’s Feb. 15 release of less-than-spectacular fourth-quarter financial numbers. Salomon Smith Barney also downgraded Nextel’s stock from “Buy” to “Outperform,” and cut its price target for the stock from $48 to $35 per share, noting concerns about the company’s churn rate, competition and pricing pressure. Nextel warned its first-quarter results would be hurt by higher-than-anticipated operating expenses.
The company’s stock rebounded slightly by the end of last week nearly reaching the $24 per share level, before falling back to around $22 per share, well below its 52-week high of $82.94 per share.
“We still believe that Nextel’s vulnerability to a single-source supplier of a unique technology puts them at a competitive disadvantage, and the spike in (costs per gross customer addition) compared to their competitors is the first indication that this theory is playing out,” said Tim O’Neil, an analyst with Wit SoundView, in a research report.
Following news that Germany’s Deutsche Telekom and France Telecom were planning to sell their combined 10-percent stake in Sprint Corp., valued at $4 billion, Sprint PCS’ stock price dropped 10 percent last Thursday, close to the $20 barrier.
The planned sell-off could place as many as 174 million shares of Sprint Corp. stock on the market, overwhelming demand at a critical time for telecom companies.
“It shouldn’t be a surprise to anybody. This was inevitable,” Tim Ghriskey, portfolio manager of the Dreyfus Fund, told Reuters. “But it creates an overhang and it’s obviously hurting the stock.”
Deutsche Telekom and France Telecom said they planned to use the proceeds from the sale to drive down their debt.
Sprint PCS stock rebounded by the end of the week to the mid-$23 per share level.
