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Sprint hits 3Q
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October 17, 2001: 6:41 p.m. ET
Phone service provider matches forecasts, cuts 6,000 jobs; PCS misses
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NEW YORK (CNNmoney) - Sprint Corp. posted sharply lower third-quarter earnings Wednesday, in line with Wall Street expectations, and said it would cut 6,000 jobs as it discontinues its ION service, a costly high-speed network project.
The company additionally reported that its publicly traded Sprint PCS (PCS: Research, Estimates) business posted a narrower third-quarter loss that nonetheless was wider than Wall Street expected.
For the quarter ended Sept. 30, Sprint (FON: Research, Estimates) posted net income of $244 million, or 28 cents a share, compared with net income of $384 million, or 47 cents a share, a year earlier. Analysts surveyed by earnings tracker First Call anticipated 28 cents a share profit.
Third-quarter revenue declined 4.5 percent to $4.24 billion from $4.44 billion.
The PCS group reported a third-quarter loss of 29 cents a share compared with a loss of 41 cents a share a year earlier. Analysts on average expected a 22 cents-a-share loss in the period, according to First Call.
PCS sales increased 55 percent to $2.65 billion from $1.71 billion.
Sprint said it will take a $2 billion charge in the fourth quarter to cover the shut down of the ION project, which had been widely expected, and the job cuts, but said the moves will result in annual cost savings of $1 billion starting next year.
Revenue in Sprint's key global markets unit fell 5 percent to $2.51 billion due to lower long-distance voice revenues despite a 21-percent increase in calling volumes.
Local telephone revenues rose a scant 1 percent to $1.56 billion, as the number of telephone access lines in service fell 0.4 percent in the third-quarter.
In an effort to cut costs and eliminate a drain on its profits, Sprint decided to terminate the ION high-speed network project. ION -- Integrated On-demand Network -- allows customers to make phone calls, send and receive faxes, and cruise the Internet over a single phone line.
Sprint unveiled the service -- the product of a secret, five-year, $2 billion development program code-named Project FastBreak -- with great fanfare in 1998. It aimed to have it available for businesses by mid-1999 and for individuals by the end of that year.
The development of ION, however, dragged on, and the broad roll-out to consumers and small businesses remained in limbo as the company tried to resolve problems with inconsistent service and technology, analysts said.
"We are taking significant steps to reduce our cost structure and sharpen our focus on the products and services that hold the best potential for growth and return on investment," said Sprint Chairman William Esrey.
Depending on the timing of job cuts and other moves, Sprint said the FON Group's fourth-quarter earnings could be in the "upper 30-cent range," with revenues declining about 5 percent. Capital spending for the FON Group will be about $5.4 billion for 2001, down from an earlier estimate of $5.9 billion.
Sprint PCS Group , the company's wireless telephone arm, added a record 1.2 million customers. That topped Wall Street expectations of 900,000 new subscribers, according to First Call. Sprint PCS's total customer base, including resale and affiliate customers, increased to 14.4 million, up 57 percent from third quarter 2000.
Sprint PCS said it expects to add about 4.2 million customers this year, above its previous forecast of 3.8 million. 
from staff and wire reports
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