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Sprint-Nextel Q2 Profits Beat Expectations

Wireless provider Sprint Nextel Corp. on Wednesday said second-quarter profits dropped sharply on takeover costs and expenses tied to its planned rollout of a WiMax network. The Reston, Virginia-based company, with operational headquarters in Overland Park, Kansas, said it earned $19 million, or 1 cent per share, during the three months ending June 30, compared with $370 million, or 10 cents per share, during the same period a year ago. And although profits are down sharply, the company said it earned 25 cents per share, still managing to beat the 22 cents per share prediction of analysts surveyed by Thomson Financial. However, revenue during the quarter rose only about 2 percent, from $10 billion to $10.16 billion, missing Wall Street's estimate of $10.2 billion.

The company, which has struggled to keep up with rivals AT&T and Verizon Wireless, said it increased its subscriber base during the quarter by 400,000, up to 54 million customers. Wholesale channels contributed 155,000 new subscribers while affiliates generated 33,000 new subscribers. During the same quarter, AT&T added 1.5 million customers while Verizon Wireless added 1.6 million customers, but lost 300,000 through the bankruptcy of Amp'd Mobile.

Chief Financial Officer Paul Saleh warned during a conference call with analysts that Sprint Nextel would likely see a loss of customers in the third quarter as more of them are jettisoned for not paying their bills and other reasons.
"The competitive environment remains quite strong so we will see some challenges," Saleh said. "But we expect the resumption of growth in subscribers in the fourth quarter."

Overall expenses during the quarter rose 8 percent to $8.5 billion, including higher network maintenance and marketing costs. Wireless revenues rose 3.5 percent from $8.5 billion to $8.8 billion while revenue from more traditional wireline business remained level at $1.6 billion. Sprint-Nextel has reiterated its guidance of between $41 billion and $42 billion in revenue and operating income before taxes and depreciation of between $11 billion and $11.5 billion. Analysts are expecting revenue of $41 billion and earnings of 87 cents per share.

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