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Sprint PCS loses money, gains customers

The long distance company's wireless division reports fourth quarter losses but counters the news with strong subscriber growth numbers.

Sprint's wireless division reported deep fourth quarter losses today, but countered the news with subscriber growth numbers that surpass its national competitors.

The long distance company reports its Sprint PCS earnings separately in preparation for an eventual public offering of stock in the division. An IPO was delayed last October amid a downturn in the market.

Capital expenditures tied to expanding its network led to division operating losses of $849 million for the fourth quarter, or $2.39 billion for the year. Total revenue was $437 million for the fourth quarter, or $1.23 billion for all of 1998.

The losses helped drag the company as a whole to lower-than-expected financial results for the fourth quarter. Sprint posted earnings of 79 cents per share, coming well below the consensus Wall Street estimate of 85 cents a share according to First Call.

Aside from the quarterly losses, the division reported wireless subscriber growth that outstripped expectations. Sprint PCS added 836,000 new subscribers in the fourth quarter of 1998 alone, boosting its customer base by more than a third. By the end of the year, the company had 2.5 million subscribers around the country.

That rate of growth puts the company's momentum far ahead even of AT&T's wireless division, whose Digital One Rate plan is customarily seen as the company with which all other U.S. wireless carriers must compete. AT&T added 445,000 net subscribers in the fourth quarter.

Analysts said the sharp uptick in Sprint's customer growth showed that it is well on the way to competing on an even playing field with AT&T.

"With 830,000 new [subscribers] it's clear Sprint has been a commercial success," said Matt Hoffman, a wireless industry analyst for Dataquest. "There's no reason to think they will not recoup their investment in few years."

Sprint executives said today that they expect to double the number of wireless subscribers in 1999 to reach 5 million customers by the end of the year.

Revenue from these new customers will likely be slightly higher than the industry average, they said. "Sprint is targeting higher volume customers and is aggressively pursing the corporate market," noted Art Krause, the company's chief financial officer, in a conference call.

The PCS group expects to post a profit by the second half of the year 2000, Krause added.