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Razr cuts deep into Sprint Nextel

Q2 profits slump

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Sprint Nextel blames merger and disposal costs for a slump in Q2 profits. It also acknowledges lower than expected subscriber growth for the quarter.

The US cellco claimed 210,000 new contract customers in the quarter, rather worse than analysts had anticipated. It also signed up 498,000 cheapo pre-paids through its Burst brand during the quarter.

Q2 net income was $370m, or 12 cents a share, a big fall on Q2 2005's net income of $600m, or 40 cents a share. Q2 revenues was $10bn, up from $5.6bn last year, thanks to the inclusion of Nextel revenues.

The company is losing market share because it has a poor handset line-up, according to Christopher King, an analyst with Stifel, Nicolaus & Co. "They don't have the [Motorola] Razr," he told Bloomberg. "It's been an extremely popular product that has changed the landscape of the industry."

Sprint Nextel workers could be in for a bumpy time ahead. The company aims to squeeze out even more costs, post-merger, in response to slower near-term growth projections. Sales, marketing and distribution activities are to be subject to re-organisation, which should produce savings equivalent to 7c a share. This comes on top of the synergy savings the firm expects from last year's merger between Sprint and Nextel. ®

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