Citing solid financial gains in a difficult environment, Sprint reported consolidated net operating revenues for Q2 of $6.5 billion, compared to $6.7 billion in the same period last year. Net income for Q2 was $7 million compared to a net loss of $68 million last year. Second quarter operating income was $370 million compared to $670 million a year ago. There was $925 million in free cash flow in Q2, bringing total free cash flow for the first half of the year to $1.3 billion. Some highlights of the quarter:
- Q2 revenues for Sprint's global markets division, local division and other wireline businesses declined by 8% compared to a year ago.
The decision to wind down the company's web hosting operation led to a pre-tax charge of $348 million in Q2
There was pre-tax charge of $241 million to write-down the value of Sprint's stake in Earthlink
Sprint's local division continues to focus on increasing penetration of bundled services and DSL, expanding Sprint-branded local service beyond existing local service territories and converting circuit-based networks to packet technology. During Q2, the division successfully converted a local office to packet switching and plans to convert a total of 210,000 lines by the end of the year.
Sprint's local division continued to experience an erosion of access lines and minutes. At the end of Q2, Sprint was serving 7,982,000 access lines, down 2.4% from a year earlier. Access minutes of use declined to 8,038,000, down 4% from a year earlier. Long distance voice minutes of use declined 14% year-over-year to 940,000. Sprint now has over 223,000 DSL lines in service, up from 86,000 at the end of Q1 2003.
Retail business voice revenues declined at a high single-digit rate compared to a year ago but were up modestly sequentially. Wholesale voice revenues declined over 20% compared to the year ago period and declined at a mid single-digit rate sequentially.
Data services revenues decreased 1 percent year over year. Double-digit growth in frame relay services was offset by declines in ATM and private-line services. Dedicated IP revenues grew at a double-digit rate in the quarter due to strength in Global IP services. Domestic dedicated IP revenues were flat. Dial IP revenues once again declined in the quarter.
Offshore IP demand is being driven by a continued expansion of Sprint's global IP network in key markets in Europe, Asia-Pacific and the Americas.
SprintPCS added 617,000 net new customer in Q2, consisting of 360,000 post-paid retail, 177,000 wholesale and 80,000 affiliate additions. It now has 18.8 million mobile customers.
SprintPCS's ARPU was $62, compared to $61 in the same period last year and $59 in Q1 2003. There was an average customer usage of nearly 13½ hours per month in Q2, compared to nearly 11 hours a year ago and 12 hours in Q1.
2003 CAPEX for Sprint's FON group is now expected to be approximately $1.8 billion, a $200 million reduction from our previous forecast. Capital spending in the local division is expected to be approximately $1.25 billion and Global Markets capital spending is expected to be approximately $450 million.
2003 CAPEX for SprintPCS is expected to be $2.1 billion. CAPEX for Q2 2003 was 60% below CAPEX for Q2 2002.
Since the beginning of the year, Sprint's net debt has declined by more than $3.5 billion.
