Sprint earnings disappoint

Sprint Nextel Corp. blamed more than $200 million in costs related to last year's merger between Sprint and Nextel Communications for a disappointing fourth-quarter earnings report, in which the company said that net income declined from $437 million in the fourth quarter of 2004 to $197 for the same quarter in 2005. However, the company still plans to eventually realize about $1 billion in merger-related cost savings.

Several financial analysts contacted by Telephony said they had expected merger-related expenses to deal Sprint a blow during the quarter. The quarterly earnings report was the first for the merged entity. The merger closed last August.

On the positive side, Sprint did report that revenue for the quarter was up about 7% from the previous year to about $11.2 billion. The company also said that it added 2 million new wireless customers, including more than 620,000 Boost Mobile customers, during the quarter, for a total customer base of 47.6 million. Average revenue per user dropped slightly from $65 to $63 year-over-year, but the company did report that 250,000 new customers signed up for its new mobile broadband service with the first 60 days after it launched during the quarter.

"[Data] was a continuing bright spot, but is still not enough to offset the declines in voice ARPU that we are seeing today and are likely to see over the next couple of years," said Todd Rethemeier of Soleil Securities/SurTerre Research in an e-mail interview.

Sprint officials also said during today's earnings call that it is continuing to work toward a second-quarter spin off of its local service operations into a new company called Embarq.