Earnings Preview: Sprint Nextel to report for 1Q

Earnings Preview: Sprint Nextel to report 1Q results; analysts expect renewed contract losses

Associated Press

NEW YORK (AP) -- Sprint Nextel Corp., the third-largest wireless carrier in the U.S., reports its first-quarter results before the stock market opens Wednesday, and analysts will be looking for signs of how the iPhone is faring

WHAT TO WATCH FOR: Sprint has been losing contract-based subscribers for years, but showed a small gain in the fourth quarter, when it started selling the iPhone. The phone is expensive, but Sprint's management considers it essential to competing with AT&T and Verizon Wireless for high-paying subscribers.

Now, analysts expect it to post another loss of contract-signing subscribers. Estimates of how many vary widely, from 22,000 to 127,000.

On the no-contract, prepaid side, analysts expect continued recruitment, this time to the tune of about half a million subscribers. The prepaying subscribers pay much less, but help Sprint minimize its losses.

Sprint faces multiple long-term challenges. Not only is the iPhone very expensive, it has also embarked on a network upgrade plan that costs billions, in order to cut costs down the road and compete in mobile broadband. During the quarter, one Wall Street analyst noted that credit default swaps were pricing in about a 50 percent chance of default within five years.

WHY IT MATTERS: Sprint has 55 million wireless subscribers, and its struggle to keep them affects other carriers' pricing. Sprint also owns most of Clearwire Corp., which is building a nationwide wireless broadband network.

WHAT'S EXPECTED: Analysts surveyed by FactSet expect Sprint to report a loss of 42 cents per share on revenue of $8.71 billion.

LAST YEAR'S QUARTER: Sprint reported a loss of $439 million, or 15 cents per share, on revenue of $8.31 billion.

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