Sprint Nextel, already struggling this year with a declining customer base and falling revenues, was dealt another blow yesterday as Qwest Communications (see its earning report, item #4 below) confirmed it was dropping the company as its provider of wireless services in favor of Verizon Wireless. The move will cost Sprint another 860,000 customers, about 1.5 percent of its 53.8 million customer base.
Sprint has been in the center of a whirlwind of news already this month. Whispers out of Germany yesterday mentioned Sprint as the possible target of a takeover bid by T-Mobile parent Deutsche Telekom, which is looking to expand its U.S. stake as it deals with vaporizing landline business at home. Sprint, meanwhile, yesterday said it was considering selling Nextel, which it acquired in 2005 for $35 billion. It's already taken a major goodwill writedown of Nextel's business-some $29.7 billion worth--and looks to be getting while the getting is good.
It may already be too late. Standard & Poor's on May 1 dropped its rating of Sprint's debt to junk status. New Sprint CEO Dan Hesse in February acknowledged that the situation at Sprint was grim, saying, "This turnaround will not happen for many quarters. The issues we face are more difficult than what I had expected to find."
Qwest plans to begin marketing Verizon-branded service this summer, and its customers will have full access to Verizon's premium lines, a sticking point with Sprint.
For more:
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