Citing solid financial gains in a difficult environment, Sprint reported consolidated net operating revenues for Q2 of $6.5 billion, compared to $6.7 billion in the same period last year. Net income for Q2 was $7 million compared to a net loss of $68 million last year. Second quarter operating income was $370 million compared to $670 million a year ago. There was $925 million in free cash flow in Q2, bringing total free cash flow for the first half of the year to $1.3 billion. Some highlights of the quarter:
- Q2 revenues for Sprint’s global markets division, local division and other wireline businesses declined by 8% compared to a year ago.
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The decision to wind down the company’s web hosting operation led to a pre-tax charge of $348 million in Q2
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There was pre-tax charge of $241 million to write-down the value of Sprint’s stake in Earthlink
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Sprint’s local division continues to focus on increasing penetration of bundled services and DSL, expanding Sprint-branded local service beyond existing local service territories and converting circuit-based networks to packet technology. During Q2, the division successfully converted a local office to packet switching and plans to convert a total of 210,000 lines by the end of the year.
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Sprint’s local division continued to experience an erosion of access lines and minutes. At the end of Q2, Sprint was serving 7,982,000 access lines, down 2.4% from a year earlier. Access minutes of use declined to 8,038,000, down 4% from a year earlier. Long distance voice minutes of use declined 14% year-over-year to 940,000. Sprint now has over 223,000 DSL lines in service, up from 86,000 at the end of Q1 2003.
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Retail business voice revenues declined at a high single-digit rate compared to a year ago but were up modestly sequentially. Wholesale voice revenues declined over 20% compared to the year ago period and declined at a mid single-digit rate sequentially.
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Data services revenues decreased 1 percent year over year. Double-digit growth in frame relay services was offset by declines in ATM and private-line services. Dedicated IP revenues grew at a double-digit rate in the quarter due to strength in Global IP services. Domestic dedicated IP revenues were flat. Dial IP revenues once again declined in the quarter.
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Offshore IP demand is being driven by a continued expansion of Sprint’s global IP network in key markets in Europe, Asia-Pacific and the Americas.
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SprintPCS added 617,000 net new customer in Q2, consisting of 360,000 post-paid retail, 177,000 wholesale and 80,000 affiliate additions. It now has 18.8 million mobile customers.
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SprintPCS’s ARPU was $62, compared to $61 in the same period last year and $59 in Q1 2003. There was an average customer usage of nearly 13½ hours per month in Q2, compared to nearly 11 hours a year ago and 12 hours in Q1.
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2003 CAPEX for Sprint’s FON group is now expected to be approximately $1.8 billion, a $200 million reduction from our previous forecast. Capital spending in the local division is expected to be approximately $1.25 billion and Global Markets capital spending is expected to be approximately $450 million.
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2003 CAPEX for SprintPCS is expected to be $2.1 billion. CAPEX for Q2 2003 was 60% below CAPEX for Q2 2002.
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Since the beginning of the year, Sprint’s net debt has declined by more than $3.5 billion.
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