Merger hits Sprint Nextel profits

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Sprint Nextel, the third-largest US mobile-phone carrier, on Wednesday said that quarterly profits were hurt by the integration of Nextel Communications following its $36bn acquisition by Sprint in August.

Fourth-quarter profits fell 55 per cent to $197m, or 7 cents a share, from $437m, or 29 cents, a year earlier, in spite of a 63 per cent increase in sales to $11.3bn. Merger integration costs were $204m.

Excluding the acquisition and other costs related to hurricanes and restructuring, fourth-quarter profit would have been 33 cents a share.

The group added 2m net subscribers in the fourth quarter, including 746,000 under the Sprint and Nextel post-paid brands, 624,000 under the pre-paid Boost Mobile brand and 651,000 through other wholesale channels and affiliates. It ended the year with 47.6m subscribers.

The company, which has also been acquiring affiliates, said it expected to complete the previously announced acquisition of Nextel Partners in the second quarter of 2006, following regulatory approvals.

Gary Forsee, Sprint Nextel’s chief executive, said the fourth-quarter results “capped off a very exciting year for our company”.

He added that wireless revenue, which more than doubled to $8.23bn from a year earlier, helped by the purchase of Nextel, “continued to grow at a very strong rate and the data contribution to average revenue per user (ARPU) increased by a double-digit percentage sequentially”.

Overall, direct post-paid monthly ARPU was $63 compared to $65 one year ago, reflecting lower roaming revenues partially offset by increased data contributions. Post-paid subscriber churn was 2.1 per cent in the quarter, down from 2.2 per cent a year earlier.

Mr Forsee added that Sprint’s local phone operations, which are due to be spun off this year, continued to generate strong cash flow and that, for the full year, this contribution grew by 11 per cent.

Sprint Nextel forecast revenue of at least $41bn this year, representing “high single-digit to low double-digit” percentage growth at the wireless unit.

Adjusted operating income before depreciation and amortisation will be about $13bn. Capital spending this year is expected to be about $6.3bn including $600m that will be spent on re-banding.

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