iDEN issues continue to pressure Sprint Nextel; carrier cuts 5,000 jobs

Sprint Nextel Corp.’s trouble in holding onto its postpaid iDEN subscribers continued during the fourth quarter as the company announced weak fourth quarter customer metrics and said that network and business investments would likely affect its financial performance in 2007.
The carrier also plans to cut its workforce by 5,000 positions to fewer than 60,000 employees, as it unifies various business and customer care systems.
The company reported 742,000 net customer additions during the fourth quarter. That number reflected a loss of 306,000 postpaid subscribers for the period, widening from a third quarter postpaid customer loss of 188,000 subscribers. The company said its fourth quarter postpaid performance was due to “solid gains in CDMA subscribers, offset by a decline in the iDEN base.” The carrier cited similar issues in the third quarter.
The carrier saw the strongest growth through its wholesale business and remaining affiliates, posting 876,000 net additions. The Boost Mobile L.L.C. sub-brand gained 171,000 net new subscribers, a relatively poor performance compared with previous quarters and likely a result of the company’s stated aim to dial back on Boost because of iDEN spectrum capacity issues in areas where it is going through a rebanding process.
“There was solid demand for CDMA voice and data services in the fourth quarter, and we had a strong performance in our mobile virtual network operator channels,” said Gary Forsee, Sprint Nextel’s chairman and CEO. “As we indicated last year, issues related to the iDEN platform resulted in decreased demand for iDEN services and increased churn. We expect the widespread introduction of our first combined CDMA-iDEN phones and improvements in iDEN network performance to benefit push-to-talk subscriber trends,” he added.
The company blamed credit tightening in the second half of the year for impacting customer growth in the fourth quarter, but also said that the restrictions had improved the credit mix of fourth-quarter acquisitions. Fourth quarter churn showed slight sequential improvement, dropping from 2.4 percent in the third quarter to 2.3 percent.
Sprint Nextel said that its performance has not substantially affected its projected financials for 2006, but that its “lower margin revenue mix, investment of an additional $1.1 billion in our business operations and start-up costs associated with the build-out of our fourth-generation WiMAX wireless network will pressure profitability” in the near term. The elimination of 5,000 jobs is the result of unifying customer care, device activation, billing and financial systems, Sprint Nextel said; most of the cuts will take place in the first quarter of 2007.
Foresee said that in 2007, Sprint Nextel would start growing its postpaid customer base again and get churn below 2.0 percent. However, those promises didn’t appear to reassure investors; Sprint Nextel stock received several downgrades from investment companies, and had plunged more than 10 percent by midday to around $17.60 per share.