UPDATE 3-Sprint raises earnings forecast; shares rise
* Q2 rev $8.84 bln vs Wall Street view $8.73 bln * Posts customer net loss of 246,000 vs analyst view 203,000 * Ups 2012 operating income view to $4.5bln-$4.6bln vs prev view $3.7bln-$3.9bln * Oper income helped by higher customer spending, lower customer costs * Shares rise 13.6 percent to $3.82 on NYSE By Sinead Carew July 26 (Reuters) - Sprint Nextel Corp raised its earnings forecast for the year and reported higher-than-expected quarterly revenue as its wireless customers increased spending, and its shares rose more than 13 percent. Investors saw the results as the best sign so far that Chief Executive Dan Hesse might turn around the No. 3 U.S. mobile service even though Sprint reported steeper than expected customer losses and a wider quarterly loss from charges related to the planned shutdown of its old Nextel network. Sprint, which has been bleeding customers for years, is in the middle of a costly network modernization project which involves upgrading its Sprint network at the same time as it decommissions the Nextel iDen network it bought in 2005. The company had warned it would suffer steep customer losses this year from its iDen network, once famous for its walkie-talkie style feature. It said on Thursday that more of these customers than expected were moving to the Sprint network. "The subscriber loss was greater than expected but it was because they were more aggressive in getting those iDen customers off the network and I don't think its a bad thing ... because it will help them shut down even more cell sites," said BTIG analyst Walter Piecyk. Smaller rival MetroPCS Communications also posted stronger than expected results Thursday, sending its shares up 31 percent to $8.23 on New York Stock Exchange. Sprint reported a net loss of 246,000 subscribers in the quarter, compared with the average expectation of about 203,000 from five analysts contacted by Reuters. The customer numbers included losses of 688,000 subscribers on the Nextel network. However, 60 percent of the customers leaving Nextel moved to the Sprint network. However weak customer numbers actually helped Sprint's costs because it pays subsidies to handset makers such as Apple Inc for each new phone. Like its rivals it discounts the phones for customers who commit to a two-year contract. On top of this Sprint said its average revenue per user for the Sprint brand was its best ever at $63.38 and compared with $59.07 in the year ago quarter. As a result Sprint was able to increase its target for 2012 operating income, excluding special items, depreciation and amortization, to a range of $4.5 billion to $4.6 billion from its previous forecast of $3.7 billion to $3.9 billion. Wells Fargo analyst Jennifer Fritzsche said the second-quarter results "more than any in recent history -- illustrate that the fruits of Sprint's labor are finally being seen." R. W. Baird analyst William Power said Sprint's second quarter earnings before interest, tax, depreciation and amortization of $1.45 billion exceeded his estimate of $1.03 billion. Several other analysts also had estimates closer to $1 billion. In contrast, larger rivals Verizon Wireless and AT&T Inc both added customers in the quarter. Sprint, which committed to spend $15.5 billion on Apple Inc iPhones over the next few years, said that iPhone sales were slightly lower in the second quarter than in the first quarter. Sprint executives said on a conference call with analysts that they had included an assumption of a new iPhone model this year in its earnings target even though it was quick to point out that it did not know when the next iPhone would launch. In contrast to its bigger rivals, Sprint is sticking to offering unlimited mobile internet usage for a flat monthly fee, helping it boast an advantage over AT&T and Verizon Wireless, which meter customer data usage. However the unlimited data offering limits Sprint's ability to offer new shared data plans that its bigger rivals are providing so customers can have one subscription for several devices including smartphones and tablets like Apple's iPad. Sprint CEO Hesse told analysts to "stay tuned" on how Sprint expects to improve usage of devices like iPad on its network. The company's quarterly loss widened to $1.37 billion, or 46 cents per share, from $847 million, or 28 cents per share, a year earlier. The results included a $782 million depreciation charge for the network decommissioning and an impairment charge related to its Clearwire Corp venture. Net operating revenue rose to $8.84 billion from $8.31 billion. Analysts expected $8.73 billion, according to Thomson Reuters I/B/E/S. Sprint shares were up 13.35 percent at $3.82 in late morning trading on the New York Stock Exchange after rising as high as $3.95 earlier in the session. By 11 AM investors had already exchanged 130 million shares making it the stock's busiest day since October 10 2011.
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