RealTime IT News

Sprint Distances Itself From Long Distance

Sprint Corp. addressed its financial future Friday in the face of dwindling stock value and lowered expectations in its FON Group.

Company officials announced their intentions to move away from the long distance market and re-focus the group's energies on the rapidly-expanding Internet data services industry. The move, however, comes at the cost to its successful wireless communications PCS Group in the form of equity sell offs.

The Sprint FON Group, a subsidiary of the Sprint Corp., has seen its stock plunge from a 52-week high in January at about 75 to this month's results in the mid-20s. It dropped even more, to $21 per share, when the company reported projected earnings per share of $1.80 to $1.90 for 2000, below analyst projections for the year.

William Esrey, Sprint chairman and chief executive officer, said the FON Group is a work in progress but still one of the best in the business. That, coupled with the success of its PCS division, assures Sprint's future.

"Our goal is straightforward -- deliver superior shareholder returns," Esrey said. "To achieve this we must continue to build PCS into a wireless powerhouse and transition FON Group into a high-growth, data driven business. Our competitors have pieces but none has the breadth and depth of network assets across all the industry segments that Sprint possesses. With capital investment in targeted areas, our portfolio of assets provides a solid platform to accelerate revenue growth."

Sprint officials say its switch in the FON Group from voice services to data will rebound its stock value. By 2003 the group plans to derive 50 percent, or $5 billion, of its earnings from its Internet backbone, mainly through the efforts of its ION program.

"My optimism is driven by the customer demand we see everyday," Esrey said. "Demand for bandwidth is nearly insatiable. Customers want fast access at work, at home and on the go. Whether business or consumer, it boils down to access to bits and bytes moved at ever-faster speeds, the ability to access that information at ever-faster speeds, and the ability to access that information, anytime, anywhere."

To meet that demand, officials are pumping $900 million, or nearly one-fifth of the total budget in 2001, into network upgrades to packet-switching technology. Paying for the upgrade comes at a cost, in part, to the PCS Group, which is selling off $3 billion in equity next year.

Ironically enough, it's the PCS Group's success that makes Sprint an attractive takeover candidate, made easier by the FON Group's low stock value.

The PCS Group manages the nation's only nationwide wireless platform. Sprint officials predict that nearly all its business users will taking advantage of its wireless Web services, more than making up for losses in the voice data arena.

One analyst noted that Sprint only relied on 44 percent of its revenues on long distance, compared to 52 percent by AT&T Corp. and 64 percent by Worldcom, Inc. AT&T and Worldcom have already announced their intentions to move away from long distance and focus on data services.

Sprint's Internet backbone, coupled with the built-in infrastructure of its incumbent local exchange carriers located throughout the U.S., make it a prime target for companies like Qwest Communications and Bell South Corp.

Bell South, for example, doesn't have an Internet backbone of its own, and is currently in the process of building a network access point in southern Florida. An acquisition would give the telco an already-built NAP, among other things, in New York.