Sprint's loss widens, sees slow improvement

By Sinead Carew

NEW YORK (Reuters) - Sprint Nextel Corp (S.N), the No. 3 U.S. wireless service provider, said on Monday it may seek changes to its credit agreements, raising questions about how long it will take to turn around the business.

The company posted a wider loss as customers defected to larger rivals and it forecast only marginal improvements in the current quarter.

Sprint expects to have enough cash for operations and repayments of maturing debts through the end of 2009, but it said it may enter into discussions with creditors to obtain waivers or amendments on credit facilities.

"This is a nightmare game of whack-a-mole where new problems keep popping up faster than you can address," said Bernstein analyst Craig Moffett. "The fact they're now talking openly about their available liquidity makes it clear this is not a short-term turn around."

The company, which reported net debt of $19.5 billion at the end of the first quarter, said it was continuing with cost reductions and looking at ways of improving the ratio of debt to EBITDA (earnings before interest, tax, depreciation and amortization), and considering getting rid of non-core assets.

Sprint expects to remain in compliance with its covenants over the next few quarters, but in its quarterly filing with U.S. regulators it said it was unable to identify specific sources to meet "liquidity needs over the longer term." Standard & Poor's cut Sprint's credit rating to junk status on May 1.

Analysts on Sprint's quarterly conference call were anxious for a response to reports the company was considering a sale of its customer-losing Nextel business, which it bought in 2005 for $35 billion. Last quarter, Sprint wrote off most the value of the acquisition, which it has struggled to integrate.

Chief Executive Dan Hesse said a separation of the Sprint and Nextel networks would be complex, but added that "nothing is off the table."

He said a turnaround at Sprint, which lost 1 million customers in the first quarter, would take "many quarters." Sprint was working to reduce customer cancellations and return to profit, but it was "still far from where we need to be."

Sprint posted a first quarter net loss of $505 million, or 18 cents a share, compared with a loss of $211 million, or 7 cents a share, a year earlier.

Excluding one-time items and merger-related expenses, it earned 4 cents per share, beating the average analyst forecast for 2 cents a share, according to Reuters Estimates.

Revenue fell 7.9 percent to $9.3 billion. Analysts on average had expected $9.4 billion.

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Sprint warned of continued pressure on gross additions of post-paid customers, who pay monthly bills, and post-paid average revenue per user, as well as adjusted operating income before depreciation and amortization in the next few quarters.

The company expects post-paid churn, or customer cancellations, and net post-paid subscriber losses to improve marginally in the current quarter, attributing the improvement to typical seasonal trends and better customer service.