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To: qveauriche who wrote (120348)	6/14/2002 8:55:12 AM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 152472

Merrill once again shows that it has no concern over the advantages/disadvantages/economics of competing systems. That's because, as usual, its analysts don't understand the technology. They should heed Warren Buffett's advice: Don't invest in what you don't understand. Art

To: qveauriche who wrote (120348)	6/14/2002 1:29:09 PM
From: cfoe	Read Replies (1) \| Respond to of 152472

indeed if PCS finances deteriorate to the point that the 1X rollout is delayed or compromised, I re-read Sprint PCS release and if anything it would seem their financial position is getting better. Higher EBITDA, lower capex, less cash shortfall, etc. (It is copied below for easy reference.) Lets look at PCS from a "value" vs. "growth" perspective. Growth mode means: Higher subscriber adds Higher gross revenue Lower ARPU Higher churn Higher subscriber acquisition costs Higher operating costs Higher capex Lower cash flow Continued losses Value mode means: Lower subscriber adds Lower gross revenue Higher ARPU Lower churn Lower subscriber acquisition costs Lower operating costs Lower capex Higher cash flow Profitability From reading the excerpt below again, it looks to me that Sprint PCS is beginning to shift from a "purely" growth mode to more of a "value" mode. Another tip-off is the number of times they use the word "profitability" at the beginning of the release. I suggest that this will not be an easy transition for the market as a whole or for once strong growth stocks - some will make it and others won't and even those that make it will be hurt stock-price-wise until the transition is completed. Sprint Updates Financial Guidance <http://biz.yahoo.com/prnews/020613/cgth051_1.html> <snip> Sprint continues to manage its PCS operations for growth and profitability. In the second quarter, we continued to refine credit policies for certain sub-prime customer segments. While these changes are expected to improve customer churn rates and profitability over time, in the short run they are reducing new customer take rates. Also during the second quarter, some competitors have implemented aggressive short-term pricing promotions. Finally, some business customers have delayed purchases in anticipation of the launch of high-speed data services. Together, these factors are having a significant impact on gross additions and, as a result, our second quarter net customer additions are forecasted to be around 300,000. In the second quarter, PCS Group expects to achieve very strong average revenue per customer, deliver strong operating cash flow performance and EBITDA of at least $800 million. Sprint continues to expect that the PCS Group will generate EBITDA of approximately $3 billion for the full year. This summer Sprint plans to launch its nation-wide 3G network with aggressive marketing campaigns. Combined with historical seasonality, Sprint currently anticipates that this will weight full-year customer gains toward the second half of the year. However, recently we have seen some indications of reduced 2002 wireless subscriber growth, including lower estimates by industry analysts. In light of these current market dynamics, Sprint believes full-year net customer additions could be 10 percent to 15 percent below our previous forecast of 3 million. It should be noted that the current environment, including competitors' promotional pricing plans, makes it challenging to provide long-term subscriber growth estimates with a high degree of confidence. As a result of lower expected growth, Sprint also has reduced its planned PCS Group capital expenditures by $100 million to $3.3 billion. This level assumes continuing strong customer usage. As a result of lower capital expenditures, Sprint's net cash requirements for 2002 have been reduced from $600 million to $400 million. These requirements are fully funded, and Sprint continues to expect that it will be free cash flow positive for 2003. Sprint recently closed on a $500 million PCS accounts receivable financing program, consistent with the previously announced 2002 financing plan. Sprint does not expect to provide any further details or updates on second quarter financial performance until it releases its second quarter earnings report, currently scheduled for July 18th.