Most of the loss came from Sprint’s FON landline division, which also saw falling revenues due to overcapacity. The PCS mobile unit, meanwhile, increased its revenues by 42%. Although it has lowered 2002 growth forecasts, it is still set for a strong year. As their strategic directions diverge further and further, it may be time to separate the two businesses fully.
US telecoms group Sprint has announced a $1.24 billion loss for Q4 2001.
US telecoms operator Sprint has announced a net loss of $1.24 billion for Q4 2001, following $1.8 billion in charges. Its landline business, FON Group, lost $904 million, while its mobile business Sprint PCS narrowed losses from $512 million to $328 million.
Much of FON’s loss came from writing off its ION Internet project, which aimed to deliver voice over IP solutions to business customers. VoIP will be an important technology in the long term, but ION was expensive and offered less functionality than conventional landline solutions. Abandoning the project has hurt Q4 results, but should leave FON healthier in future.
However, FON has also been hit hard by the weak economy and network overcapacity, which together drove long-distance charges down. Its quarterly revenues fell 8.7% to $4.01 billion – and the long-distance glut shows little sign of easing. Meanwhile, revenues from FON’s local operations stayed nearly constant. FON’s best strategy for the future is more decline-management than anything else.
PCS’ results were far better. The mobile operator’s revenues rose 42% to $2.76 billion, and it led the industry in customer growth. It cut 2002 growth forecasts to three million customers from 3.6-3.7 million, reflecting fears that total US wireless subscriber growth for 2002 will be lower than expected. Even so, the revised forecast would leave PCS with a higher proportion of new mobile users than before.
The US mobile telecoms industry is still far from saturation – and still has to benefit from the widespread introduction of data services. As an operator with near-national coverage, Sprint PCS should be well placed to benefit from this growth.
At present, PCS and FON are both part of the same holding company, and have their own tracking stocks that trade separately but are still related. This structure reduces strategic focus, while also limiting synergies. Sprint should consider following AT&T and BT into a full mobile demerger, splitting the higher-growth higher-risk mobile business from the commoditized landline group.