Fresh off its decision to build its own LTE network, Sprint Nextel (NYSE:S, news, filings) reported its Q3 earnings this morning. Revenues of $8.33B were slightly on the light side, while loss per share of $0.10 was better than expected. Their cash levels checked in at $4B, enough to make good progress on that LTE buildout assuming they can refinance the $2.3B due in March. The story diverges, however, when looking at the company's wireless and wireline divisions individually.
On the wireless side, they added just under 1.3M total net wireless subscribers, with 304K net postpaid additions for the Sprint brand, 485K on the prepaid side, and 835K from wholesale and affiliates. That was the best they've done in a long while, although net postpaid subscribers still managed to fall by 44K. That gives them 53M in total, 32.9M of whom were postpaid. Adjusted OIBDA of $1.214B was 17.6% of revenue, and they spent $647M on capex during the quarter.
In the company's smaller wireline business, revenues fell to $1.062B for the third quarter, down 15% over the prior year and 3% sequentially, which was expected due to voice pricing pressure as well as the TW Cable VoIP that has been migrating off their network. However, OIBDA fell sharply to $184M, as operating expenses were flat in the face of declining revenue. That's an adjusted OIBDA margin of just 17.3% now. Perhaps Sprint has now reached the point where the fixed costs of their network prevent them from cutting expenses fast enough to keep up with revenue declines?
Sprint also amended their credit facility, adding $150M to the total and modifying the definition of EBITDA to let them add in certain equipment subsidy costs. That last bit obviously has to do with the iPhone 4S, which Sprint started selling (and subsidizing) 12 days ago and upon which they are betting on to give them some real momentum again on the subscriber front. Can't have big iPhone sales causing covenant problems... that would have been bad.
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