When I'm having a bad day, I try to cheer myself up with a little game. I remind myself that I don't have to run a telecom company. Lots of debt, lots of regulation, and lots of competitors... now that's a bad combination.
Sprint's (NYSE:PCS) latest quarterly report confirms my fears about the telecom sector.
Sprint says it turned profits into losses. The Kansas City-based telecom provider posted a consolidated net loss of $498 million compared with net income of $519 million last year. Ouch! Investors responded by pushing the stock down 90 cents to $4.41 on Thursday.But if you believe management, good things are on the way and it's only a matter of time before things turn around. CEO Gary Forsee, who took the helm in March, pledged to cut costs by 5% to 7%. He'll need to. Sprint's acquisition costs surged to $465 per customer from $396 last year, the highest among the top six telecom-providers.
The only bright spot is that Sprint now expects free cash flow of about $300 million for the year, up from its previous estimate of $200 million. There are also some promising sounds coming from other telecoms. Nextel (NASDAQ:NXTL) recently beat expectations, and Verizon (NYSE:VZ) is also expected to post strong results.
Still, I think it's bit premature to invest in the telecom sector. I'll wait to hear the ring of profits.
Brian R. Hook, publisher of BizBlip.com, can be reached by email at [email protected].
