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Technology Stocks : Sprint Nextel Corporation (S) -- Ignore unavailable to you. Want to Upgrade?

To: Cooters who wrote (323)	9/24/2000 11:41:16 PM
From: slacker711	Read Replies (1) \| Respond to of 1691

Sprint currently expects PCS Group third quarter earnings before interest, taxes, depreciation and amortization (EBITDA) will be in the low $100 million range. This is favorable compared to previously expected levels. PCS Group continues to achieve strong average customer revenue and lower average acquisition costs and cash costs per user. PCS Group currently expects third quarter customer churn will be in the high two percent to three percent range which would be a sequential increase. This is principally due to a higher level of company-initiated deactivations. As a result of the higher deactivations and partially due to increased competition, PCS Group expects to report net direct customer additions of around 800,000 in the third quarter. This is below previously expected levels. Including affiliates and resale customers, PCS Group expects to add approximately 1.1 million total customers in the third quarter. PCS Group continues to target approximately four million net direct customer additions for the full year. Including affiliate and resale customers, PCS Group expects to end the year with more than 10 million total customers. www3.sprint.com It is hard for me to believe that the above statement has caused such a huge collapse in the stock price. They actually pre-announced better than expected financial results with the $100m in OCF for the quarter. Of course, for a company like PCS, this is less important than the number of new subs that are added. If you look at the numbers, it looks like this miss is almost completely due to an increase in the churn for the quarter. An increase from 2.6% to 3% would cause a decrease of around 90,000 customers. It looks like SBC/BLS and Verizon probably made some headway with their nationwide plans.... However, when you look at PCS's valuation now, it looks ridiculously cheap. The market cap for PCS stands at around $26B. This will translate to around $2600 a sub (at the end of the year) for a company which is likely to grow it's subscriber base by 40-50% next year. This doesnt take into account any increase in ARPU due to the current data initiatives. They managed to increase ARPU by $4 last quarter alone....and since then they have announced plans which target high-end business customers. PCS also seems to have the most unused spectrum of any of the wireless companies. In two years, PCS should be a combination wireless ISP/voice provider.....it seems likely that ARPU will increase significantly. If PCS was a stand-alone company it would be selling at least twice it's current price (witness VSTR take-over price of over $50B). Even the near term looks bright....PCS should be coming out with at least 4 new models in the next couple of months. Part of the shortfall in subs this quarter might be due to the fact that these phones seem to have been delayed from the third to the fourth quarter (particuarly Kyocera....I expect big things from the QCP-3035). Sub growth should be strong next quarter, and should only accelerate next year as 1xrtt is finally rolled out. Sometimes, it looks like the market provides opportunities that are too good to be true....can anyone point out what I am missing? Slacker