GDP, Jobless Reports; Sprint Falls

123jump.com Staff
28 Feb, 2008
New York City

Fourth quarter GDP growth declined to 0.6% after the economy expanded at a brisk rate of 4.9% in the third quarter. Real GDP rose at 2.2% in 2007 sharply lower than 2.9% in 2006 according to the Commerce Department. Jobless claims rose 19,000 for the week ending on Feb 23. Separately, Sprint reported a large fourth quarter loss and wrote-off the entire purchase of Nextel, acquired only two years ago.

[R]10:30AM New York – U.S. stocks decline on the GDP data and rising jobless claims.[/R]

Fourth Quarter GDP Falls, Initial Jobless Claims Rises

Real gross domestic product in the fourth quarter increased at annual rate of 0.6% in the fourth quarter of 2007, according to preliminary estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 4.9%. Real GDP rose at 2.2% in 2007 sharply lower than 2.9% in 2006 according to Commerce Department.

Initial claims of unemployment rose by 19,000 to 373,000, adjusting for seasonality, and were revised upwards to 354,000 from 349,000 according to Labor Department.

Sprint Writes off Nextel Purchase

Only after two years of Nextel acquisition, Sprint wrote-off most of its purchase price. In the fourth quarter, the third largest wireless carries, reported a loss $29.45 billion or $10.36 per share compared to income of $261 million or 9 cents a share. The quarterly loss included one-time goodwill charge of $29.7 billion for Nextel purchase.

Consolidated net operating revenues in the quarter were $9.8 billion, compared to $10.4 billion in the fourth quarter of 2006. Full-year 2007 revenues were $40.1 billion versus $41.0 billion in 2006.

Sprint net income in the fourth quarter fell to 21 cents a share from 29 cents a year ago on revenue decline of 5.7% to $9.85 billion.

Fourth quarter revenues in the wireless segment were $8.5 billion, a 2% sequential decline and a 6% decline from the fourth quarter of 2006. Data revenues increased 12% sequentially and 26% from a year ago. Revenues in 2007 were $34.7 billion, a 1% decline compared to 2006, primarily driven by lower equipment revenue.

In the fourth quarter wireless subscribers declined by 108,000 and post-paid churn rate was 2.3% same as a year ago and in the third quarter of 2007. For the post-paid subscribers, the average revenue declined 1% from the third quarter and 4% from a year ago to $58.

Sprint also borrowed $2.5 billion under its revolving credit facility and to mitigate any potential financial risk related to $1.25 billion bonds due in November of 2008, $400 million in commercial paper loans, and $600 million bonds that mature in May 2009. Sprint also canceled its dividend for the foreseeable future.

Wireless had 53.8 million total subscribers at the end of 2007. This compares with 53.1 million subscribers at the end of 2006. The net growth of 700,000 subscribers for the year reflects a gain of 1.9 million subscribers in prepaid and wholesale segments, offset by a net decline of 1.2 million in direct and affiliate post-paid subscribers.

In the fourth quarter, total post-paid subscribers declined 683,000 due to a loss of iDEN users. In the third quarter of 2007, post-paid subscribers declined by 337,000.

Wireless capital expenditures totaled $1.4 billion in the fourth quarter and were $5.0 billion for the full year, or a little over 14% of annual revenues. In 2007, the majority of capital was deployed to increase capacity, enhance and expand the network footprint and triple the footprint.