Sprint updates financial guidance

Communications company Sprint announced updated 2002 financial guidance Sept. 23 for its FON Group and PCS Group tracking stocks.

For its FON Group, Sprint now expects earnings per share, excluding one-time items, to be in a range from $1.41 to $1.43 for the full year, which compares to previous guidance of at least $1.40 per share.

Estimated capital expenditures have been reduced to $2.4 billion from $2.5 billion. FON Group free cash flow is now estimated to be approximately $1.2 billion compared to the $1 billion estimated in previous guidance. As a result, on a consolidated basis, Sprint now expects to generate positive free cash flow of approximately $200 million for 2002, compared to the previous estimate to break even. The anticipated increase is the result of the reduction in capital expenditures and improvement in working capital.

The company also reiterated that it expects FON Group profits of approximately $4.7 billion for the year and a mid-single digit decline in revenues.

PCS group

The expected gross customer additions of approximately $1.7 million for the third quarter are slightly above second quarter results. However, during the quarter, a significantly higher number of customers have been deactivated due to nonpayment. As a consequence of this action, the company expects churn to temporarily increase to a high 3 percent range in the quarter, up from 2.9 percent in the second quarter.

The PCS Group expects to benefit from greater availability of PCS Vision handsets, PDA's and connection cards in the fourth quarter. The company expects to resume positive net customer growth in the fourth quarter.

Sprint expects full-year PCS Group revenues to be more than $12 billion.

Sprint now expects full-year earning before interest, taxes, depreciation and amortization (EBITDA) to be $2.7 billion versus the previous target of $2.9 billion mainly due to a smaller customer base and higher bad debt expense associated with the increase in customer churn.

The expected lower EBITDA is targeted to be fully offset by reduced capital expenditures, which are now estimated to be approximately $3.1 billion compared to previous guidance of $3.3 billion. In total, full-year cash requirements for the PCS Group remain at about $1 billion.

Directories sale

Sprint announced on Sept. 22 that it had reached a definitive agreement to sell its directory publishing business, Sprint Publishing & Advertising, to R.H. Donnelley for $2.23 billion.

The transaction is expected to close in January 2003, and is subject to the usual closing conditions, including anti-trust approval. The sale will yield after-tax cash proceeds in excess of $2 billion.

Sprint expects to release its third quarter earnings Oct. 17.