Sprint Announces Record Third Quarter Results; Quarterly Revenues Surpass $5 Billion Mark - Company Financial Information

Cambridge Telcom Report, Oct 25, 1999

Sprint Wednesday announced record third quarter results. Consolidated Sprint revenue for the quarter was $5.11 billion, the first $5 billion quarter in the corporation's history, and an 18 percent increase from $4.34 billion in the same period last year.

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. Record-setting customer acquisition continued in the PCS Group during the quarter, while per customer acquisition costs and operating costs-per-customer decreased compared to a year ago.

"Sprint's record $5 billion quarter demonstrates the power of a company with local, long-distance, Internet, data and wireless capabilities," said William T. Esrey, Sprint chairman and chief executive officer. "Those capabilities, supported by superior distribution channels, enable Sprint to bundle wireless, local and long-distance services; sell our portfolio of products in thousands of stores located only minutes from the majority of U.S. homes; pioneer the wireless web and advanced wireless data offerings; and pursue our 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."

SPRINT FON GROUP HIGHLIGHTS:

-- Revenues increased 7 percent in the third quarter of 1999 to $4.34 billion from $4.04 billion in the third quarter of 1998.

-- Diluted earnings per share from recurring core operations increased 11 percent to 59 cents, compared to 53 cents per share a year ago.

-- Operating income from core operations increased 12 percent to $843 million from $750 million last year.

-- Operating cash flow from core operations was $1.37 billion, up 11 percent from $1.24 billion a year ago.

-- Net income 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.

Long-distance

-- Revenues increased 8 percent to $2.71 billion from $2.50 billion in the third quarter of 1998.

-- Operating income was $415 million, up 21 percent from $344 million a year ago.

-- Calling volumes rose 23 percent from the third quarter of 1998.

-- Operating cash flow increased 14 percent to $655 million from $576 million a year ago.

Local Telecommunications

-- Revenues increased 6 percent to $1.42 billion from $1.34 billion in the third quarter a year ago.

-- Operating income rose 8 percent to $378 million from $350 million during the same period last year.

-- Access lines increased 5 percent from the previous year, ending the quarter with a total of over 7.9 million access lines.

-- Operating cash flow increased 8 percent to $638 million from $589 million a year ago.

Product Distribution and Directory Publishing

-- Revenues were flat in the third quarter at $437 million compared to $435 million a year ago. Non-affiliate sales increased 10 percent, but were largely offset by a decrease in product sales to affiliates.

-- Operating income increased 12 percent to $64 million from $57 million during last year's third quarter.

Sprint ION and Other Ventures

-- Sprint ION's after-tax losses were 7 cents per share for the quarter, compared with 2 cents per share in the third quarter of 1998.

-- Third quarter losses for Global One and other ventures were 11 cents per share compared to 4 cents per share a year ago.

"Sprint's FON Group performance was marked by excellent execution in our core businesses, effective leveraging of distribution channels to increase product sales and significant advances toward our nationwide roll-out of Sprint ION to businesses and consumers," Esrey said.

In the long-distance business, operating income, calling volumes and operating cash flow experienced double-digit growth, despite increased pricing pressures in the long-distance market.

In the long-distance residential market, products that cater to consumers' lifestyles -- Sprint Nickel Nights, Sprint Sense Anytime and Sprint 1000 -- continue to fuel volume and revenue growth. Sprint Nickel Nights, introduced in July, has achieved a record volume of sales calls and has succeeded in attracting callers who make 30 percent more calls than Sprint's average customer. Once again Sprint was recognized for its world-class customer service, winning for the fifth consecutive year J.D. Power and Associates' top ranking for overall customer satisfaction among high-volume residential long-distance users.

In the long-distance business segment, revenues for data services, including ATM, Internet Protocol, and Frame Relay, increased more than 45 percent compared to the third quarter of 1998.

In the local telephone operation, access line growth in the quarter was driven by demand for additional lines to support Internet access. In the carrier market, Sprint secured a four-year contract worth an estimated $30 million to provide payphones and telecommunications devices for the deaf to a major transportation company.