Sprint Expects Slow Recovery from Losses

There has been a lot of recent rumors concerning Sprint Nextel. For example, there were rumors that Deutsche Telekom may make a bid for Sprint Nextel. There was also some buzz that the mobile phone service provider will give up Nextel. Sprint CEO Dan Hesse also said that "nothing is off the table" even though a separation of the Sprint and Nextel networks would be complex.

It would be easy to believe to all these rumors because it's evident that Sprint is still struggling. The company recently announced that it may seek changes to its credit agreements. The announcement raised concerns about the length of time it will take for the carrier to recover.

The company claims to have enough funds to devote for operations and repayments of maturing debts through the end of 2009. However, discussions with creditors to obtain waivers or amendments on credit facilities may be necessary.

The mobile phone carrier lost 1 million customers in the first quarter and Hesse expects many quarters will pass before his company can successfully reduce customer cancellations and return to profit.

Let's break down the numbers. Sprint reported a first quarter net loss of $505 million, or 18 cents a share. A year earlier, the mobile phone carrier suffered a loss of $211 million, or 7 cents a share. The company's revenue decreased by 7.9 percent or around $9.3 billion.

Fortunately, all is not lost for Sprint. The company is expecting that customer cancellations, and net post-paid subscriber losses will decrease because the carrier has worked hard to provide better customer service. The season's trend could also be a factor in the expected improvement. The company is planning to update shareholders in August. They will provide an assessment of the carriers' business model, its sale and marketing plans and its financial outlook.

According to some analysts, Sprint's rivals, AT&T Inc and Verizon Wireless benefited heavily from Sprint's problems. These companies reported significant customer growth in the first quarter suggesting that they took market share from Sprint.

Sprint Nextel recently announced a WiMax venture with Clearwire Corp and expects that the deal will help in the recovery. However, iPCS Inc., Sprint's biggest affiliate announced that was suing Sprint over the Clearwire deal. The affiliate claims that the WiMax venture would breach the exclusivity agreement between both parties.

I think it remains to be seen whether Sprint will be able to get out of this slump. If things continue to look bleak at the next quarters, then the rumors of a merge with Deutsche Telekom may become a reality.