Sprinting Ahead?

Sprint (NYSE:FON) doubled its first-quarter profit year-over-year -- a state that hardly anybody can complain about, although the headlines read like a deja vu to other days. Specifically, it's a case of same story, different day when it comes to the idea that wireless revenues offset sluggishness in traditional telecom offerings.

First-quarter earnings came in 94% higher at $472 million, or $0.31 per diluted share. Total revenues increased by 3% to $6.94 billion. Free cash flow more than doubled to $532 million compared with the same period a year ago, even after a $300 million pension contribution.

Sprint's good news included the addition of 1.3 million more wireless subscribers, which added up to a 34% increase over last year. However, the company's press announcement stated that local phone service was called "steady" -- and that, of course, is another way to hint that it's not exactly an area that yields torrid growth -- while long distance sales dropped 10%. Indeed, in the company's conference call, Sprint's president and COO, Len Lauer, said, "However, we expect that our reported revenues in long distance will continue to be impacted throughout the year by the precipitous declines that occurred throughout 2003 and much of 2004 and the continued migration of consumer LD from wireline to wireless."

To that end, the initiatives planned for the coming year include the merger with Nextel (NASDAQ:NXTL) and the spinoff of local phone services. (Even more interesting to consider is the idea that Sprint just absorbed its wireless tracking stock back into itself just about a year ago.)

And given many of the variables affecting the telecom industry these days -- just look at the migration toward voice over Internet protocol, or VoIP, and even the entry of cable giants like Comcast (NASDAQ:CMCSA) into the struggle for voice business -- it's hardly surprising to see many telecoms focus away from more traditional services like local and long-distance services.

Investors likely take comfort in many of the things apparent in the release -- not least of which is the company's plans to focus on obvious strengths. However, it's also obvious that there is a lot of change afoot at Sprint. Over the past year, investors have enjoyed a 20% increase in the stock price, a performance that has outpaced the S&P 500's. However, it's not hard to imagine that for the time being, investors have a lot to chew on at this point -- considering the challenges that face telecom these days.

Here's some recent telecom commentary from the Foolish archives:

• Given the competitive issues in the industry, rival Verizon's getting naked.
• Do Sprint's and Nextel's chiefs deserve big, fat bonuses?
• Bill Mann discusses telecom and the assumption of consistent genius.

Alyce Lomax does not own shares of any of the companies mentioned.