(Adds WiMax, credit ratings)
By Sinead Carew
NEW YORK, Feb 28 (Reuters) - Sprint Nextel Corp (S.N) posted a $29.45 billion quarterly loss on Thursday due to a huge goodwill write-off and forecast deepening customer losses, sending its stock down as much as 13 percent to a five-year low.
The No. 3 U.S. mobile service said it would stop paying dividends for the foreseeable future, and Chief Executive Dan Hesse said it would take many quarters to turn the company around and rebuild its brand.
“To be frank, the issues we face are more difficult than what I expected to find,” Hesse told analysts on a conference call. “It takes hard work and time to regain a reputation.” Hesse replaced Gary Forsee as CEO in December.
Sprint has been losing ground to rivals amid network and customer service problems. Analysts had expected a weak fourth quarter performance, but they were hoping for a clearer plan from Sprint to turn the business around.
Instead, Sprint forecast subscriber losses that will be “considerably worse than even the most bearish estimates out there,” said Stanford Group analyst Michael Nelson.
In the current quarter Sprint expects to lose 1.2 million customers who pay monthly bills, compared with 683,000 such losses in the fourth quarter and Nelson’s estimates for a first-quarter loss of 400,000. Sprint said it does not expect any improvement to subscriber losses in the second quarter.
Smaller rival T-Mobile USA, owned by Deutsche Telekom (DTEGn.DE), on Thursday reported a gain of 951,000 total net new customers in the fourth quarter.
Sprint forecast first-quarter operating income of $1.8 billion to $1.9 billion before depreciation and amortization. Stifel Nicolaus analyst Chris King had expected $2.3 billion.
“The bar they’re setting here better be rock-bottom,” said King. He hopes Sprint beats its outlook as Hesse had a history of conservative guidance at Embarq Corp EQ.N, the Sprint spin-off that he previously headed.
Starting Friday Sprint said it will offer a $99.99-per-month unlimited calls and data plan.
The move goes further than unlimited voice-only plans unveiled last week by larger rivals AT&T Inc (T.N) and Verizon Wireless. But the Sprint plan is not as aggressive as some analysts expected. Some had feared that Sprint would spur a price war with an unlimited plans as low as $60 a month.
However, several analysts said the new offer was unlikely to help the company boost its market share significantly.
Hesse said the new price plan should help boost data use but warned it was “not a silver bullet” for Sprint, which needs to stem customer losses, improve how it handles customer telephone inquiries, and create a simpler branding message.
He said Sprint’s brand was strong but “lacked relevance and a clear message.” He plans to keep Sprint as the main brand and to use the Nextel brand for its push-to-talk service.
Sprint’s fourth-quarter loss of $10.36 a share compared with a profit of 9 cents a share, or $261 million, a year ago.
Revenue fell 6 percent to $9.8 billion, missing the average Wall Street forecast of $9.91 billion.
Before one-time items such as a $29.7 billion goodwill write-off from its acquisition of Nextel Communications, Sprint earned 21 cents per share, topping the average Wall Street forecast of 18 cents, according to Reuters Estimates.
Post-paid average revenue per user was $58 per month in the fourth quarter, and the company said that would fall to just above $56 in the first quarter. It said it could see a further drop in the second quarter, but not as steep.
Hesse said a high-speed network Sprint is building based on WiMax technology would help it fight rivals, but he would not say if it still planned to spend $5 billion on it by 2010.
He said Sprint had “wide-ranging” talks with Clearwire Corp CLWR.O but was not ready to announce an agreement with the smaller WiMax provider. Sprint and Clearwire scrapped a WiMax network sharing pact late last year.
Sprint also said it borrowed $2.5 billion from a revolving credit facility and executives sought to reassure analysts that the company was in compliance with its debt covenants.
Fitch Ratings cut its credit rating for Sprint to “junk” status after the results report and said it may lower the rating again. Standard & Poor’s warned that it may also cut Sprint’s investment grade rating to “junk” status.
Sprint shares fell 9.83 percent to $8.07 on the New York Stock Exchange after falling to $7.76 -- the weakest level since October 2002 -- earlier in the day. Sprint has lost almost 70 percent of its market value since August 2005, when it bought Nextel.
Sprint supplier Motorola Inc MOT.N also fell 4.41 percent to $10.40. Motorola, which is already suffering from market share losses, is the main supplier of phones and network gear for Sprint’s Nextel-based services. (Click on [ID:nN28573498] for interview with Sprint’s CEO) (Additional reporting by Michele Gershberg and Dena Aubin; editing by Mark Porter and John Wallace)