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sprint nextel Quarterly Presentations 2005 1st
 

sprint nextel Quarterly Presentations 2005 1st

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    sprint nextel Quarterly Presentations 2005 1st sprint nextel Quarterly Presentations 2005 1st Presentation Transcript

    • Investor Update First Quarter 2005 20 April 2005 © 2005 Sprint. All Rights Reserved. Sprint and the diamond logo design are trademarks of Sprint Communications Company L.P. All other trademarks are the property of their respective owners.
    • Cautionary Statement Regarding Forward-Looking Information The information highlighted in this presentation includes selected financial information and should be read in conjunction with our consolidated financial statements and notes and the Cautionary Statements Regarding Forward-Looking Information included in our press release dated April 20, 2005, which is posted on Sprint’s website at <<http://www.sprint.com/sprint/ir/fn/>>, as well as our financial statements and notes, the trends and risk factors affecting us and other information provided in our annual, quarterly and current reports, proxy statement, and other filings made with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. This presentation includes quot;forward-looking statementsquot; within the meaning of securities laws. The statements in this presentation regarding the business outlook and expected performance as well as other statements that are not historical facts are forward-looking statements. The words quot;estimate,quot; quot;project,quot; quot;forecast,quot; quot;intend,quot; quot;expect,quot; quot;believe,quot; quot;target,quot; quot;providing guidancequot; and similar expressions identify forward-looking statements, which are estimates and projections reflecting management' judgments based on currently available information and s involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements speak only as of the date indicated. Sprint is not obligated to publicly release any revisions to forward-looking statements to reflect events after the date of any news release or unforeseen events. With respect to these forward-looking statements, Sprint has made assumptions regarding, among other things, customer and network usage, customer growth and retention, pricing, costs to acquire customers and to provide services, the timing of various events and the economic environment. This presentation contains certain non-GAAP financial measures as well as reconciliations to the most directly comparable GAAP financial measures. Because Sprint does not predict special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, Sprint does not provide reconciliations to its forward-looking measures. Definitions of these non-GAAP financial measures are available in the April 20, 2005, First Quarter 2005 Investor Update located at <http://www.sprint.com/sprint/ir/>. First Quarter 2005 Investor Update 2
    • quot;Safe Harborquot; Statement under the Private Securities Litigation Reform Act of 1995 A number of the matters discussed in this document are not historical or current facts deal with potential future circumstances and developments, in particular, information regarding the new company, including expected synergies resulting from the merger of Sprint and Nextel, combined operating and financial data, future technology plans, and whether and when the transactions contemplated by the merger agreement will be consummated. The discussion of such matters is qualified by the inherent risks and uncertainties surrounding future expectations generally, and also may materially differ from actual future experience involving any one or more of such matters. Such risks and uncertainties include: the failure to realize capital and operating expense synergies; the result of the review of the proposed merger by various regulatory agencies, and any conditions imposed on the new company in connection with consummation of the merger; approval of the merger by the stockholders of Sprint and Nextel and satisfaction of various other conditions to the closing of the merger contemplated by the merger agreement; and the risks that are described from time to time in Sprint’s and Nextel’s respective reports filed with the SEC, including each company’s annual report on Form 10-K for the year ended December 31, 2004. This document speaks only as of its date, and Sprint and Nextel each disclaims any duty to update the information herein. Additional Information and Where to Find It Sprint Corporation has filed a Registration Statement on Form S-4 with the SEC (Reg. No. 333-123333) containing a preliminary joint proxy statement/prospectus regarding the proposed transaction. SHAREHOLDERS OF SPRINT AND SHAREHOLDERS OF NEXTEL ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/ PROSPECTUS THAT IS PART OF THE REGISTRATION STATEMENT, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE COMBINATION. The final joint proxy statement/prospectus will be mailed to shareholders of Sprint and shareholders of Nextel. Investors and security holders will be able to obtain the documents free of charge at the SEC’s web site, www.sec.gov, from Sprint Investor Relations at Sprint Corporation, 6200 Sprint Parkway, Overland Park, Kansas 66251, 800-259-3755, Option 1 or from Nextel Investor Relations at 2001 Edmund Halley Drive, Reston, Virginia 20191, 703-433-4300. Participants in Solicitation Sprint, Nextel and their respective directors and executive officers, other members of management and employees and the proposed directors and executive officers of Sprint Nextel, may be deemed to be participants in the solicitation of proxies in respect of the combination. Information concerning the proposed directors and executive officers of Sprint Nextel, Sprint’s and Nextel’s respective directors and executive officers and other participants in the proxy solicitation, including a description of their interests, is included in the joint proxy statement/prospectus contained in the above-referenced Registration Statement on Form S-4. First Quarter 2005 Investor Update 3
    • Reconciliation of non-GAAP Liquidity Measures Quarter ended March 31, 2005 Quarter ended March 31, 2004 Long Other & Long Other & Consolidated Wireless Local Distance Eliminations Consolidated Wireless Local Distance Eliminations Operating income (loss) $ 1,036 $ 455 $ 445 $ 146 $ (10) Operating income (loss) $ 724 $ 277 $ 446 $ 11 $ (10) (1) Special items - 2 1 (3) - (1) Special items 30 4 14 12 - Adjusted operating income (loss)* 1,036 457 446 143 (10) Adjusted operating income (loss)* 754 281 460 23 (10) Depreciation and amortization 1,036 644 277 117 (2) Depreciation and amortization 1,233 644 268 320 1 Adjusted EBITDA* 2,072 $ 1,101 $ 723 $ 260 $ (12) Adjusted EBITDA* 1,987 $ 925 $ 728 $ 343 $ (9) Adjust for special items - Adjust for special items (30) (2) Other operating activities, net (688) (2) Other operating activities, net (919) Cash provided by operating activities-GAAP 1,384 Cash provided by operating activities-GAAP 1,038 Capital expenditures (659) Capital expenditures (683) Dividends paid (187) Dividends paid (115) Investments in and loans to affiliates, net (14) Other investing activities, net 3 Other investing activities, net 8 Free Cash Flow* 243 Free Cash Flow* 532 Decrease in debt, net (22) Decrease in debt, net (1,012) Proceeds from common stock issued 33 Investments in debt securities, net 19 Proceeds from common stock issued 58 Investments in debt securities, net 34 Other financing activities, net 13 Other financing activities, net 16 Change in cash and equivalents - GAAP $ (390) Change in cash and equivalents - GAAP $ 304 (1) In the 2005 first quarter, Sprint's restructuring activities were related to its ongoing organizational realignment initiatives as well as the Web Hosting wind-down. This activity had no impact on consolidated results. In the 2004 first quarter, Sprint recorded a $30 million pre-tax restructuring charge related to its ongoing organizational realignment initiatives as well as the Web Hosting wind-down. These charges reduced net income by $19 million. (2) Other operating activities, net includes the change in working capital, change in deferred income taxes, miscellaneous operating activities and non-operating items in income (loss) from continuing operations. First Quarter 2005 Investor Update 4
    • Adjusted Earnings Per Share Reconciliation Quarters Ended March 31, 2005 2004 $ 470 $ 223 Earnings Applicable to Common Stock Preferred stock dividends paid 2 2 472 225 GAAP Net income (1) Special items (net of taxes) Restructuring and asset impairments - 19 $ 472 $ 244 Adjusted Net Income $ 0.31 $ 0.16 GAAP diluted earnings per share Special items - 0.01 (2) Adjusted Earnings Per Share $ 0.31 $ 0.17 (1) In the 2004 first quarter, Sprint recorded a $30 million pre-tax restructuring charge related to its ongoing organizational realignment initiatives as well as the Web Hosting wind-down. These charges reduced net income by $19 million. (2) Earnings per share data may not add due to rounding. First Quarter 2005 Investor Update 5
    • Sprint Consolidated Financial Results 1Q05 4Q04 1Q04 $6.94B $6.93B - $6.71B 3% Net Operating Revenues $1.04B $1.02B 2% $754M 37% Adjusted Operating Income $2.07B $2.05B 1% $1.99B 4% Adjusted EBITDA $0.31 $0.31 - $0.17 82% Adjusted EPS $659M $1.34B -51% $683M -4% Capital Expenditures $532M $624M -15% $243M 119% Free Cash Flow Consistent execution while planning merger First Quarter 2005 Investor Update 6
    • Mix Weighted Towards Growth Sectors Revenue Contribution Adjusted EBITDA Contribution 100% 100% 21% 21% 22% 35% 36% 37% 75% 75% 24% 24% 28% 12% 11% 17% 50% 50% 55% 55% 53% 50% 52% 25% 25% 47% 0% 0% 1Q05 4Q04 1Q04 1Q05 4Q04 1Q04 Wireless LD Local Wireless LD Local Results exclude North Supply & before eliminations Wireless contribution is increasing • Strong year-over-year growth in DSL and IP • First Quarter 2005 Investor Update 7
    • Progress on Financial Priorities for 2005 Improve Margins Execute 2005 Plan Profitable Growth Key partnerships Drive productivity Focus on day-to- • • • day operations Strategic products Leverage expense • • and investments initiatives Deliver the numbers • Detailed synergy Seamless merger / • • plans spin First Quarter 2005 Investor Update 8
    • Updated 2005 Guidance Consolidated Revenue Adj EBITDA Adj Op Income Capex Low Single Digit $8.5B - $8.7B $4.3B - $4.5B $4.0B - $4.2B Growth Reiterating consolidated forecast • Improved outlook for wireline businesses • Continued bullish view on wireless • First Quarter 2005 Investor Update 9
    • Wireless 1Q05 Highlights Wireless Net Additions (includes direct, MVNO, and affiliate) 1,500 +34% 1,250 Strong subscriber growth • 1,000 (000s) 750 Profit improvement • 500 250 Significant traction in • 0 1Q04 1Q05 Sprint PCS Fair & Flexible offering Churn SM 3.5% Momentum in MVNO -4 • 0b 3.0% ps strategy 2.5% 2.0% 1Q04 1Q05 First Quarter 2005 Investor Update 10
    • Wireless Financial Results 1Q05 4Q04 1Q04 $3.87B $3.84B 1% $3.44B 13% Net Operating Revenues $457M $417M 10% $281M 63% Adjusted Operating Income $1.10B $1.07B 3% $925M 19% Adjusted EBITDA Adjusted EBITDA as a percent 31.1% 31.0% +10bps 30.2% +90bps of Service Revenue $683M $177M NA $519M 32% Adjusted EBITDA less CAPEX First Quarter 2005 Investor Update 11
    • Wireless Operating Performance 1Q05 4Q04 1Q04 518K 526K -2% 414K 25% Direct Net Additions 621K 923K -33% 420K 48% Wholesale Net Additions 166K 133K 24% 138K 20% Affiliate Net Additions 1.31M 1.58M -18% 972K 34% Total Net Subscriber Additions 2.5% 2.7% -20bps 2.9% -40bps Churn $61 $62 -1% $61 NA ARPU $1.83B $1.85B -1% $1.74B 5% Costs of Services and Products $935M $919M 2% $768M 22% Selling, General & Admin Improving customer retention driving higher adds First Quarter 2005 Investor Update 12
    • Strong Momentum in Data Wireless Data ARPU Wireless Data Revenue Wireless Data Subscribers $8.00 $400 9.0 % 8.0 3 $6.00 $300 +8 % 3% 29 +6 + 7.0 $200 $4.00 6.0 $100 $2.00 5.0 $0 $0.00 4.0 1Q04 1Q05 1Q04 1Q05 1Q04 1Q05 Highest ARPU contribution from data in industry • EV-DO being aggressively deployed into the network • First Quarter 2005 Investor Update 13
    • Long Distance Highlights Revenue $2,000 -1% Good performance driven by • $1,750 solid execution $1,500 (millions) Progress on strategy to $1,250 • focus on solutions, network $1,000 convergence and targeting $750 4Q04 1Q05 growth opportunities Adjusted EBITDA $300 Encouraging signs in LD • voice pricing thresholds $275 % 1 +1 (millions) CNO revenues and • $250 subscribers ramping $225 $200 4Q04 1Q05 First Quarter 2005 Investor Update 14
    • Long Distance Financial Results 1Q05 4Q04 1Q04 $1.72B $1.73B -1% $1.91B -10% Net Operating Revenues $882M $889M -1% $957M -8% Business Voice $183M $190M -4% $229M -20% Consumer Voice $412M $405M 2% $452M -9% Data $178M $176M 1% $223M -20% Internet $143M $124M 15% $23M NA Adjusted Operating Income $260M $235M 11% $343M -24% Adjusted EBITDA $195M $144M 35% $287M -32% Adjusted EBITDA less Capex First Quarter 2005 Investor Update 15
    • Aggressive Cost Management Full year 2005 expected to benefit from • aggressive cost actions taken in 2004 Access initiatives paying dividends • CSP + SGA down 3% sequentially and 7% y-o-y • Adjusted EBITDA well in excess of capex on • prudent investment allocations First Quarter 2005 Investor Update 16
    • Local 1Q05 Highlights Strong 1st quarter • Revenue Data growth largely • $1,600 offset effect of access $1,400 line declines ($Millions $1,200 Solid Adjusted • $1,000 EBITDA margin $800 1Q04 4Q04 1Q05 Executed while • planning local spin-off First Quarter 2005 Investor Update 17
    • Local Financial Results 1Q05 4Q04 1Q04 $1.50B $1.51B -1% $1.51B -1% Net Operating Revenue $446M $484M -8% $460M -3% Adjusted Operating Income $723M $757M -4% $728M -1% Adjusted EBITDA $567M $428M 32% $519M 9% Adjusted EBITDA less CAPEX 7.64M 7.67M -0.4% 7.88M -3.0% Access Lines 7.55B 7.72B -2% 8.46B -11% Access M OU 1.33B 1.29B 3% 990M 34% LD M OU First Quarter 2005 Investor Update 18
    • DSL – Building Long Term Value Lines in Service (000's) 600 Strong service line growth • % 500 58 DSL penetration increased + • 400 to 10% of capable lines 300 Average revenue per user • 200 1Q04 1Q05 of $43 Net Additions (000's) 100 $300M annualized revenue • 75 stream and growing % +31 50 25 0 1Q04 1Q05 First Quarter 2005 Investor Update 19
    • Increasing Household Penetration of Strategic Products Penetration of at least one • 100% 8% 12% or more strategic product 26% 27% 75% rose to 71% Consumer LD penetration • 33% 50% 32% increased over 400 basis 25% points year-over-year 33% 29% 0% DSL penetration increased • 1Q04 1Q05 Basic Service 1 Strategic Product by almost 400 basis points 2 Strategic Products 3+ Strategic Products First Quarter 2005 Investor Update 20
    • Q&A Gary Forsee, Chairman and CEO • Len Lauer, President and COO • Bob Dellinger, Executive Vice President and CFO • Mike Fuller, President Local • Howard Janzen, President Sprint Business Solutions • Tim Kelly, President Sprint Consumer Solutions • Kurt Fawkes, Vice President Investor Relations • First Quarter 2005 Investor Update 21