Sprint said Wednesday third quarter earnings were 41 cents a share, just under First Call's expectation of 42 cents a share. The company also announced results for its money-losing but fast growing PCS division.
Shares is Sprint (NYSE: FON) were up 1/8 to 63 15/16 Wednesday morning. The stock's rapid rise slowed after MCI WorldCom (Nasdaq: WCOM) and Sprint announced a definitive merger agreement on Oct. 5. The combined company, to be called WorldCom, will be the result of the largest merger ever, expected to close in the second half of 2000. MCI WorldCom shares were up 5/8 to 73 3/16.
Net income for all of Sprint's businesses was $359 million, or 41 cents per share, down 13 percent from $415 million, or 47 cents per share, a year ago. The decrease was due largely to expected losses related to Sprint ION and increased losses from Global One.
Third quarter losses for Global One and other ventures were 11 cents a share compared to 4 cents per share a year ago. Global One's operating results continued to be affected by regional economic conditions and competitive pricing pressures. Sprint plans to restructure Global One in conjunction with France Telecom and Deutsche Telekom.
Diluted earnings per share in the FON Group's core business grew 11 percent from the third quarter a year ago to 59 cents per share. The gain was driven by record revenue and a double-digit increase in operating income, Sprint said.
Sprint attributes its revenue of $5.11 billion, an 18 percent increase from $4.34 billion in the same period last year, to the combined power of a company with local, long-distance, Internet, data and wireless capabilities. The combined capabilities enable Sprint to bundle its services, and pursue its "nationwide, integrated 'any distance' communications strategy through Sprint ION, which will utilize DSL access and one of the broadest fixed wireless infrastructures in the U.S," said William T. Esrey, Sprint chairman and chief executive officer in a company statement.
In the company's long-distance business, revenue increased 8 percent to $2.71 billion from $2.50 billion in the third quarter of 1998, and calling volumes rose 23 percent from the third quarter of 1998. Sprint said gains came despite increased pricing pressures in the long-distance market.
Other strategies advanced during the quarter include the launch of Sprint ION. Sprint ION's after-tax losses increased to 7 cents a share for the quarter, compared with 2 cents per share in the third quarter of 1998. Sprint began building the fixed wireless infrastructure for its "third path" -- along with cable and local telephone lines -- to bring Sprint ION's "any distance" communications capabilities to homes and businesses. Sprint ION will enable users to conduct multiple phone calls, high-speed Internet sessions, fax transmissions and videoconferences over one connection.
Sprint's PCS Group also continued to rack up losses for the quarter. Loss was $1.31 per share. Highlights for Sprint's PCS Group include the addition of 720,000 new customers -- an 87 percent increase over the third quarter last year, leaving Sprint PCS with nearly 4.7 million customers at quarter's end. Total revenue was $844 million in the third quarter.
Sprint PCS (NYSE: PCS) also said on Wednesday it expects to add more than 1 million new customers in the fourth quarter due to marketing promotions and holiday purchases, but average revenues per subscriber may decline modestly. PCS shares were up 1/8 to 73 5/8.
Sprint PCS also announced the Sprint PCS Wireless Web, a suite of wireless data products and including a Web Browser, which allows connection via PCS Phones to text-only versions of some web sites. In addition to Yahoo!, Sprint PCS forged relationships with Weather.com, CNN Interactive, Bloomberg.com, MapQuest.com, InfoSpace.com and Ameritrade for its wireless initiative.