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Price war torpedoes Sprint forecasts

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ComputerWire: IT Industry Intelligence

On the eve of its launch of 3G services in the US, Sprint Corp has warned that its full-year customer growth figures in its mobile phone business could be 10% to 15% lower than its original estimate of 3 million.

The news, given in a financial update, led to its shares diving 29.5% to $10.58 last Friday, and puts the company in a weak position in the expected consolidation of cellular phone operators in the US.

Sprint's pessimism on subscriber additions comes despite the fact that its plans to launch its nationwide 3G network with "aggressive marketing campaigns" and it expects this will weight customer additions to the second half of the year.

Price-cuts by competitors have created an environment where Sprint said it is "challenging to provide long-term subscriber growth estimates with a high degree of confidence."

Not all mobile operators have such a bleak outlook, and earlier this month Nextel Communications Inc said it was on track to exceed expectations for the current financial year. It said recent strength in monthly revenue, coupled with solid subscriber additions, is driving excellent top-line growth.

Sprint has also lost subscribers after tightening up credit policies, and with competitors launching what it describes as short-term pricing promotions and business customers holding off purchases in anticipation of the arrival of 3G, it said it only expects to get 300,000 new customers in the second quarter.

With lower growth ahead, Sprint has cut capital expenditure of its PCS group by $100m to $3.3bn. Its landline business also has problems. Instead of the low-single-digit decline in revenue it originally expected, it now expects a downturn in the mid-single digits. It is still confident that its FON group will report earnings in line with expectations of $0.33 a share, but this has been made easier by trimming capital expenditure plans by $100m to $2.6bn.

© ComputerWire.

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