Paul Saleh. CFO and acting CEO Sprint Nextel Corporation. Dec. 3, 2007

Transcription

1 Paul Saleh CFO and acting CEO Sprint Nextel Corporation Dec. 3, 2007

2 Cautionary Statement This presentation includes forward-looking statements within the meaning of the securities laws. The statements in this presentation regarding the business outlook, expected performance, forward looking guidance, continuation of our previously announced share buy-back program, as well as other statements that are not historical facts, are forward-looking statements. The words "estimate," "project," forecast, "intend," "expect," "believe," "target," providing guidance and similar expressions are intended to identify forward-looking statements. Forward-looking statements are estimates and projections reflecting management's judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, customer and network usage, customer growth and retention, pricing, operating costs, the timing of various events and the economic environment. Future performance cannot be assured. Actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include: the effects of vigorous competition, including the impact of competition on the price we are able to charge customers for services and equipment we provide and our ability to attract new customers and retain existing customers; the overall demand for our service offerings, including the impact of decisions of new subscribers between our post-paid and prepaid services offerings and between our two network platforms; and the impact of new, emerging and competing technologies on our business; the impact of overall wireless market penetration on our ability to attract and retain customers with good credit standing and the intensified competition among wireless carriers for those customers; the potential impact of difficulties we may encounter in connection with the integration of the pre-merger Sprint and Nextel businesses, and the integration of the businesses and assets of Nextel Partners, Inc. and the PCS Affiliates that we have acquired, including the risk that these difficulties could prevent or delay our realization of the cost savings and other benefits we expect to achieve as a result of these integration efforts and the risk that we will be unable to continue to retain key employees; the uncertainties related to the implementation of our business strategies, investments in our networks, our systems, and other businesses, including investments required in connection with our planned deployment of a next generation broadband wireless network; the costs and business risks associated with providing new services and entering new geographic markets, including with respect to our development of new services expected to be provided using the next generation broadband wireless network that we plan to deploy; the impact of potential adverse changes in the ratings afforded our debt securities by ratings agencies; the effects of mergers and consolidations and new entrants in the communications industry and unexpected announcements or developments from others in the communications industry; unexpected results of litigation filed against us; the inability of third parties to perform to our requirements under agreements related to our business operations, including a significant adverse change in Motorola, Inc. s ability or willingness to provide handsets and related equipment and software applications, or to develop new technologies or features for our iden, network; the impact of adverse network performance; the costs and/or potential customer impacts of compliance with regulatory mandates, particularly requirements related to the reconfiguration of the 800 MHz band used to operate our iden network, as contemplated by the Federal Communications Commission s Report and Order released in August 2004 as supplemented by subsequent memorandums; equipment failure, natural disasters, terrorist acts, or other breaches of network or information technology security; one or more of the markets in which we compete being impacted by changes in political or other factors such as monetary policy, legal and regulatory changes or other external factors over which we have no control; and other risks referenced from time to time in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2006, in Part I, Item 1A, Risk Factors Sprint Nextel. All rights reserved. 2

3 Agenda Strong asset base Progress in 2007 Actions underway to improve wireless performance Leverage product & service differentiation Expected results

4 Strong Asset Base Targeted Customer Segmentation 54M wireless subscribers $40.7B LTM consolidated revenues $11.5B LTM adjusted OIBDA Differentiated Products & Services High performance push-to-talk Wireless broadband (EVDO) leadership Robust handset/pda lineup Unique applications & content Powerful Network & Spectrum Position Best-ever wireless network performance 65,000 cell sites Global IP Network ~54 MHz of spectrum at 800/1900 MHz ~98 MHz of 2.5 GHz spectrum 1 1) Average MHz for 85 of the top 100 markets 2007 Sprint Nextel. All rights reserved. 4

5 Progress on Fundamentals Best-ever Network Performance Improvement in Dropped Calls 2005 vs. current Gaining Traction Change in Metrics Jun-07 vs. Sep-07 45% 15% 25% 25% iden CDMA Likelihood to Recommend Most Wanted to Investigate Impressive Handset/PDA Lineup i880 Muziq Pearl II Improving Customer Service Metrics ~10% Q3-07 Oct-07 CDMA ~8% ~75% Centro Touch i335 Rumor Lower Monthly Call Volumes Faster Answer Times Improving Handle Times 2007 Sprint Nextel. All rights reserved. 5

6 Progress on Fundamentals Transition complete to a single financial/hr system Transitioning to single billing & customer care platform Extensive wireless broadband coverage; preparing to launch PTT on CDMA in early 2008 including full iden interoperability Data leadership 25% Revenue Growth 3Q-06 3Q-07 Wireless Data Revenues Annualized revenues of $5B EVDO Rev A coverage >215M POPs Over 1.5M aircards ~10M text messaging subscribers 43% Revenue Growth Wireline Internet Revenues 3Q-06 3Q-07 Annualized revenues of $1.6B Serving over 2.6M Cable VOIP subscribers Growing MPLS sales to enterprise accounts 2007 Sprint Nextel. All rights reserved. 6

7 Key Objectives and Action Plans Key Objectives Action Plans Greater focus on retention Improve the Customer Experience Simplify the Business Consistent execution across customer touchpoints Re-engineer sub-prime offerings Rationalize distribution channels Complete transition to single customer service engine Improve care operations 2007 Sprint Nextel. All rights reserved. 7

8 Greater Focus on Customer Retention Background Higher ARPU from current customers More predictable lifetime value Familiarity & appreciation of differentiated services Substantial % of gross adds from existing accounts New customers are more expensive to acquire Action Plans Launch loyalty-based offers Re-focus resources on general business Align sales incentives with retention focus Drive quality & consistency across touch points 2007 Sprint Nextel. All rights reserved. 8

9 Re-launching Nextel Direct Connect Background 20M subscribers M iden, 4.3M Boost & 1.2M PowerSource ~50% more data ARPU from PowerSource iden subscriber trends Gross adds down over 50% Deacts flat Substantially lower marketing spend for Nextel Direct Connect Minimal new device introductions Loss of focus in indirect channels Action Plans Leverage best-ever network performance Increase marketing spend for Nextel Direct Connect Dedicated sales resources for Nextel Direct Connect Launch new iden and CDMA devices with Nextel Direct Connect capability Incent migration to CDMA only when customer experience is seamless Reinvigorate base management efforts among core user groups Maintain quality during re-banding Introduce new push-to-x services 9

10 Re-engineer Sub-prime Offers Background ~50% of industry decisions expected to be sub-prime in 07 Less than 25% of Sprint s post paid base is sub-prime Cost to serve sub-prime is ~70% higher than prime Not all sub-primes are created equal Action Plans Improve segmentation Tighter credit standards Selective distribution Geographic segmentation Simplified offers Enhance cost structure Specialized customer care queue Add-on services to qualified customers only Improving self-help tools Leveraging Boost Unlimited 2007 Sprint Nextel. All rights reserved. 10

11 Business Simplification Actions More consistent execution in stores & indirect channels Fewer store formats Greater focus on customer care support at retail level Fewer, high quality product & service launches emphasizing iconic devices Complete migration of all customers to single customer management platform Rationalize & consolidate call centers 2007 Sprint Nextel. All rights reserved. 11

12 Wireline-Wireless Convergence Data Network (intranet) Internet / extranet Wireless Edge Wireline Edge Wireless Voice Global IP Core Wireline Voice Remote Access Wireline edge Benefits of Convergence Fewer technologies to manage/support Less complexity and lower cost Operational integration at network level Economies of scale Sprint s Key Differentiators Fully flexible MPLS IP multimedia systems Broad wireless broadband capabilities & deep spectrum position 2007 Sprint Nextel. All rights reserved. 12

13 Xohm Background 10X Cost/Performance Improvement First-to-Market Advantage Path to New Revenue Growth Launch Update Soft launch in Dec-2007 Commercial Launch in 2008 Broadening Eco-system 2007 Sprint Nextel. All rights reserved. 13

14 Expectations Improved operational execution Higher customer satisfaction and retention Improved cost structure due to simplified business Greater capital efficiency Higher free cash flow from operations Generate higher return on capital 2007 Sprint Nextel. All rights reserved. 14

15 Non-GAAP Financial Measures Sprint Nextel provides financial measures generated using generally accepted accounting principles (GAAP) and using adjustments to GAAP (non-gaap). The non-gaap financial measures reflect industry conventions, or standard measures of liquidity, profitability or performance commonly used by the investment community for comparability purposes. These non-gaap measures are not measurements under accounting principles generally accepted in the United States. These measurements should be considered in addition to, but not as a substitute for, the information contained in our financial statements prepared in accordance with GAAP. We have defined below each of the non-gaap measures we use, but these measures may not be synonymous to similar measurement terms used by other companies. Sprint Nextel provides reconciliations of these non-gaap measures in its financial reporting. Because Sprint Nextel does not predict special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, Sprint Nextel does not provide reconciliations to GAAP of its forward-looking financial measures. The measures used in this release include the following: Adjusted Earnings per Share (EPS) is defined as income from continuing operations, before special items, net of tax and the diluted EPS calculated thereon. Adjusted EPS before Amortization is defined as income from continuing operations, before special items and amortization, net of tax, and the diluted EPS calculated thereon. These non-gaap measures should be used in addition to, but not as a substitute for, the analysis provided in the statement of operations. We believe that these measures are useful because they allow investors to evaluate our performance for different periods on a more comparable basis by excluding items that relate to acquired amortizable intangible assets and not to the ongoing operations of our businesses. Adjusted Net Income is defined as income (loss) from continuing operations before special items. Adjusted Net Income before Amortization is defined as income (loss) from continuing operations before special items and amortization, net of tax. These non-gaap measures should be used in addition to, but not as a substitute for, the analysis provided in the statement of operations. We believe that these measures are useful because they allow investors to evaluate our performance for different periods on a more comparable basis by excluding items that do not relate to the ongoing operations of our businesses. Adjusted Operating Income is defined as operating income before special items. This non- GAAP measure should be used in addition to, but not as a substitute for, the analysis provided in the statement of operations. We believe this measure is useful because it allows investors to evaluate our operating results for different periods on a more comparable basis by excluding special items. Adjusted OIBDA is defined as operating income before depreciation, amortization, restructuring and asset impairments, and special items. Adjusted OIBDA less Cap Ex represents Adjusted OIBDA less our capital expenditures. Adjusted OIBDA Margin represents Adjusted OIBDA divided by non-equipment net operating revenues for Wireless and Adjusted OIBDA divided by net operating revenues for Long Distance. These non-gaap measures should be used in addition to, but not as a substitute for, the analysis provided in the statement of operations. We believe that Adjusted OIBDA and Adjusted OIBDA Margin provide useful information to investors because they are an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, spectrum acquisitions and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Adjusted OIBDA and Adjusted OIBDA Margin are calculations commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the telecommunications industry. Free Cash Flow is defined as the change in cash and cash equivalents less the change in debt, investment in certain securities, proceeds from common stock and other financing activities, net, from continuing operations. This non-gaap measure should be used in addition to, but not as a substitute for, the analysis provided in the statement of cash flows. We believe that Free Cash Flow provides useful information to investors, analysts and our management about the cash generated by our core operations after interest and dividends and our ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments. Net Debt is consolidated debt, including current maturities, less cash and cash equivalents, current marketable securities and restricted cash. This non-gaap measure should be used in addition to, but not as a substitute for, the analysis provided in the balance sheet and statement of cash flows. We believe that Net Debt provides useful information to investors, analysts and credit rating agencies about the capacity of the company to reduce the debt load and improve its capital structure Sprint Nextel. All rights reserved. 15

16 Non-GAAP Reconciliations Quarter Ended Twelve Months Ended September 30, June 30, March 31, December 31, September 30, Net operating revenues $ 10,044 $ 10,163 $ 10,092 $ 10,438 $ 40,737 Operating income $ 398 $ 316 $ 1 $ 569 $ 1,284 Special items before taxes Merger and integration expense Severance, exit costs and asset impairm Contingencies and other Adjusted operating income $ 658 $ 569 $ 315 $ 770 $ 2,312 Depreciation and amortization 2,222 2,313 2,268 2,404 9,207 Adjusted OIBDA $ 2,880 $ 2,882 $ 2,583 $ 3,174 $ 11,519 Note: Results for each of the periods reflected include the results of each of the acquired PCS Affiliates, Nextel Partners and Velocita from either the date of the acquisition or the start of the month closest to the acquisition date Sprint Nextel. All rights reserved. 16