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Despite the excitement of an all-inclusive phone plan, CEO Dan Hesse apologizes for the $29 billion charge related to integrating Nextel's network and spectrum.
Sprint on Thursday showed two sides of its business as it launched a $99.99 all-you-can-eat monthly phone plan against the backdrop of a $29.45 billion financial loss it will take related to its acquisition of Nextel.
Confirming what nearly everyone in the mobile phone industry knew for months, Sprint Nextel acknowledged it made a disastrous decision when it acquired Nextel for $35 billion three years ago.
In reporting its fourth quarter loss, nearly all of it related to the Nextel acquisition, Sprint's new chief executive Dan Hesse indicated the firm's situation was continuing to deteriorate and was more difficult than he had expected.
Immediately after releasing its financial report, Sprint dashed hopes and expectations that it would unveil a $60 flat rate all-inclusive plan to undercut rivals' recently-announced $100 plans.
Several analysts had predicted Sprint would unveil a $60 plan to compete with its larger competitors with $100 monthly plans like AT&T, Verizon Wireless, and T-Mobile. Sprint apparently chose to compete with features, not with price.
In launching its "Simply Everything" plan for $99.99, Sprint said the plan will be offered to its CDMA and iDEN customers. The domestic plan will provide unlimited voice, data, text, e-mail, Web-surfing, Sprint TV, Sprint Music, GPS Navigation, Direct Connect and Group Connect services. New activations require a two-year contract.
Hesse Acknowledges Challenges
Hesse took over the top position at Sprint in December and has quickly instituted a series of actions including job cuts, a management shakeup, and a decision to move the company's headquarters to its historical offices in Kansas.
But the daunting challenge of integrating Nextel's incompatible network and spectrum into Sprint's networks continues to defy an easy solution.
"Given current deteriorating business conditions, which are more difficult than what I had expected to encounter, these changes will take time to produce improved operating performance, and our near-term subscriber and financial results will continue to be pressured," Hesse said in a statement. The company also signaled that it expects the downward trends to continue during the second quarter.
In its financial report, Sprint said net operating revenues were $9.8 billion for the quarter versus $10.4 billion in the fourth quarter of 2006. Full-year revenues were $40.1 billion versus $41.0 billion in 2006. The company also said it will suspend dividend payments.
The company said it is assessing a reorganization of its business model as well as its financial outlook.
Sprint still remained optimistic about some of its businesses. It reported that IP revenue increased 42% annually, driven primarily by demand from its cable and enterprise customers. Some 700,000 new cable customers were added over the year, too.
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