January 9, 2007 3:30 PM PST
Sprint Nextel continues network build despite financial woes
On Monday, Sprint, the third-largest cell phone provider in the U.S., said its revenue for 2007 would only be slightly higher than revenue generated in 2006. It forecast 2007 revenue of $41 billion to $42 billion compared with $41 billion in 2006. The company also said it will lay off 5,000 workers to help reduce costs. At the end of 2006 the company had 64,600 employees.
CEO Gary Forsee blamed the weak expectations and job cuts on lower profit margins. He also said the $1.1 billion the company is spending on business operations, including start-up costs associated with building its latest WiMax wireless network, have put pressure on the company's earnings.
"We will continue to adjust our cost structure, which will include a work force reduction, as we meet the changing demands of the business," he said in a statement.
Even though the company added 742,000 total net subscribers in the fourth quarter and expects to report average revenue per customer above competitors' levels, it is seeing a high rate of customers canceling service, especially customers of the former Nextel. Sprint acquired Nextel Communications in August 2005.
Forsee said problems with Nextel's iDEN network hurt demand and increased cancellation rates in 2006. Sprint's 3G, or third-generation, network, which is still being deployed in parts of the country, uses a technology called EV-DO. The two technologies are not compatible with each other.
The company's performance isn't getting in the way of its plans for the fourth-generation network. And on Monday, Motorola, one of Sprint Nextel's named partners in the endeavor, announced it would be providing the equipment for the network in Chicago. Motorola said it will deploy WiMax infrastructure to at least 1,000 sites in the greater Chicago area, providing select area coverage that complements Sprint Nextel's existing EV-DO network. Initial service is expected to begin late in 2007, with the commercial launch set for the first half of 2008.
Motorola also is participating in equipment and software trials at Sprint Nextel's 4G laboratory located in Herndon, Va., just outside of Washington, D.C.
Sprint executives said in August that the company would spend about $1 billion on the network in 2007 and another $1.5 billion to $2 billion in 2008. The new 4G network is expected to go live in the fourth quarter of 2007. About 100 million people will have access to the network by the end of 2008, the company has said.