Sprint Nextel Corp. made major revenue connections in its wireless and cable-services businesses, but it took a major earnings hit from its recent mega-merger acquisition of Nextel Communications Inc.
Fourth-quarter wireline-voice revenues did drop 6% in the quarter, but that was partially offset by Sprint Nextel’s increasing cable-telephony business. The company inked deals with operators including Time Warner Cable, Mediacom Communications Corp., Massillon Cable TV, Wave Broadband and Blue Ridge Communications to support their voice-over-Internet-protocol rollouts, providing key elements ranging from soft-switch and telephone-network interconnections to long-distance service.
Sprint Nextel now provides managed cable-telephony services to five cable operators with a total of more 826,000 users. That’s a 33% gain from the end of the third quarter.
It also has forged a joint-venture deal with Comcast Corp., Time Warner Cable, Cox Communications Inc. and Advance/Newhouse Communications to develop wireless and converged wireless/wireline services.
Meanwhile, the telco’s digital-subscriber-line business added a modest 55,000 customers during the quarter. As of the end of the year, 74% of Sprint Nextel’s local lines were high-speed-Internet-capable, with broadband penetration standing at 13%.
Overall, Sprint’s $35 billion acquisition of Nextel, completed last fall, contributed to a steep drop in fourth-quarter earnings, which fell to $197 million, or 7 cents per share, compared with the $437 million it collected for the fourth quarter of 2004.
On the flip side, total revenue -- including, for the first time, a full quarter of Nextel’s revenue contribution -- also rose sharply, from $6.9 billion in the fourth quarter of 2004 to $11.3 billion in the fourth quarter of 2005.
The Nextel acquisition centered Sprint Nextel’s business on the cellular segment, with more than 70% of its revenue coming from wireless services. It also added 2 million new wireless customers in the fourth quarter, raising its total to 47.6 million.
Sprint Nextel is in the process of spinning off its local communications business under the brand name Embarq. It is also in the process of acquiring affiliate Nextel Partners Inc., a wireless affiliate that serves primarily smaller markets. The latter should add another 2 million wireless customers to Sprint Nextel’s count.
“Our targets for the coming year call for a continuation of solid wireless growth that is expected to be partially offset by a lower contribution from long distance,” CEO Gary Forsee said. “With our merger integration efforts well under way, we continue to gain confidence in our synergy plans and we expect to achieve operating synergies of nearly $1 billion in 2006.”