KANSAS CITY, Mo. (AP) -- Sprint Corp. swung to a loss of $498 million in the third quarter as the phone company recorded a $1.2 billion drop in the value of wireless spectrum that had been used to offer high-speed Internet service.
The loss, which reflects the combined results of Sprint's separately traded wireline and wireless businesses, compares with a net profit of $519 million during the third quarter of 2002.
Combined third-quarter revenue for the Overland Park, Kan.-based company totaled $6.7 billion, down slightly from $6.8 billion a year ago.
Broken out, the wireline-based telephone and Internet business lost $433 million, or 48 cents per share, in the quarter. That compared with earnings of $526 million, or 59 cents per share, for the Sprint FON unit in the year-ago period, which included one-time gains of $302 million.
The latest results include an after-tax charge of $768 million relating primarily to the writedown in the value of the so-called fixed wireless spectrum, which Sprint said is now worth just $300 million, down from $1.5 billion. The spectrum had been used for Sprint's bubble-era efforts to sell high-speed broadband access to homes.
Excluding that one-time charge, Sprint FON would have earned 38 cents per share, beating the 34 cents a share expected by analysts surveyed by Thomson First Call.
Third-quarter revenue for the FON division was $3.5 billion, down from $3.8 billion.
The Sprint PCS wireless division lost $65 million, or 7 cents per share, meeting most analyst forecasts for the quarter. That compared with a loss of $7 million, or 1 cent per share, a year earlier.
Sprint PCS reported revenues of $3.3 billion, up from $3.2 billion the year before.
Shares of Sprint FON were up 16 cents to close at $15.90 on the New York Stock Exchange. Shares of Sprint PCS were down 91 cents to close at $4.41.
Greg Gorbatenko, vice president of equity research for Loop Capital Markets, said that while Sprint FON had a good quarter, investors were concerned about the "churn" rate, or customer turnover, at Sprint PCS.
Although total subscribers grew by nearly 500,000, that net gain includes the loss of about 2.7 percent of the wireless customer base coming into the quarter. By contrast, the subscriber churn rate in the second quarter was 2.4 percent.
Gorbatenko said turnover could increase further once new rules take effect Nov. 24 allowing cell phone users to change wireless companies without losing their phone numbers.
"People are just very nervous that this is symptomatic of a bigger problem," Gorbatenko said.
But Robert Dellinger, Sprint's chief financial officer, argued in an interview that the new wireless number rules may enable Sprint PCS to lure subscribers away from rival companies.
"We have a real opportunity to gain share there," he said. "We do have the most competitive product offering for those customers."
Sprint also updated its full-year forecast for the FON unit, saying it expects earnings between $1.43 and $1.45 per share. Previously, the company had expected FON to post 2003 earnings of $1.35 to $1.40 per share.
The full-year estimate for PCS was unchanged at loss of between 43 cents and 48 cents per share for the year.
During a conference call with analysts, Robert Dellinger, Sprint's chief financial officer, said the company reduced its debt by $3.9 billion during the quarter, and "is sitting with an excellent liquidity profile" with $3.6 billion cash on hand at the end of September.
For the first nine months of the year, Sprint's consolidated earnings were $1.18 billion versus $591 million a year ago. Consolidated revenue was down 3.1 percent to $19.5 billion from $20.14 billion a year earlier.