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Friday, November 07, 2008
Sprint Nextel Post Loss As Customers Continue Exodus
Donna Fuscaldo
FOXBusiness
Suffering from a continuing customer exodus, Sprint Nextel (S) posted a $326 million loss for its third quarter.
During the third quarter Overland Park, Kan.-based Sprint Nextel said 1.3 million wireless customers left the company with roughly 1.1 million of them falling into the “postpaid” category. Postpaid customers are ones that sign up for annual plans and pay monthly. According to MarketWatch, Sprint has lost more than 4 million customers during the past two years.
Sprint said it expects to lose more postpaid customers in the fourth quarter.
For its third-quarter, the nation’s third largest wireless provider posted a net loss of $326 million, or 11 cents a share, compared with income of 64 million, or two cents a share, in the year-earlier third quarter. Revenue declined 12% to $8.82 billion.
Excluding items, Sprint Nextel said it would have broken even on a per-share basis compared with adjusted income of 23 cents a share in last year’s third quarter. Analysts, according to Thomson Reuters, had expected Sprint Nextel to weigh in with earnings of a three cents a share and revenue of $8.85 billion.
Sprint’s wireless business had a 13% decline in revenue to $7.5 billion.
In addition to reporting quarterly results, Sprint Nextel said it reduced the amount it can borrow from its credit agreement to $4.5 billion from $6 billion but at the same time increased the allowed debt ratio to 4.25 times earnings before taxes and other adjustments, up from 3.5 times earnings. The company said it repaid $1 billion of the loan under the amended credit agreement.
“During tough economic times, we tightly managed our business to generate and retain cash and maintain substantial liquidity while continuing to reduce debt,” said Dan Hesse, Sprint Nextel CEO, in a press release.
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Some mutual funds want you to pay for the privilege of them (or your investment adviser) taking your money to invest. It's called a load, and it works like a cover charge to get into a nightclub. Luckily, there are such things as no-load funds. As the name implies, shares of these funds are sold without a fee paid to a broker or investment advisor.
The entire amount you invest in no-load funds goes to work for your returns. On the other hand, with load funds, right off the bat you're charged commission (not to mention other fees incurred over the life of the investment). Let's say, for example, you invest $25,000 into a load fund that charges a 5% commission. This costs you $1,250 off the top, bringing your actual investment down to only $23,750.
The often-cited horse race analogy argues against investing in load funds. Here's the logic behind it: Would you place a bet on a horse that had to start a race 200 yards behind the others? Well, maybe you would if you got a tip from a sketchy, trench coat-clad man in a dark alley. However, under most circumstances, it's not smart to put your money on that handicapped horse.
But some argue that at times that man in the trench coat (aka your broker) knows more about the horses than you do, and has a better shot at picking a winner. Also, sometimes these fees are unavoidable because some funds are available only through investment advisers.
Cost-benefit analysis can help determine when a load fund is worth it (in other words, when it will score you a load) and when it is better to "do it yourself" and avoid the fees. Load-fund fees range depending on share class and can cover a variety of costs, such as paper work and fund management.
