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Sprint Loses Key Outsourcing Contract With Time Warner Cable

Channel Partners

March 10, 2010

2 Min Read
Sprint Loses Key Outsourcing Contract With Time Warner Cable

Shares of Sprint Nextel Corp. (S) started bouncing back this week as the carrier predicted “revenue stability” for later this year.

That is, until a financial analyst told clients in a research note that Sprint is losing an outsourcing contract worth $250 million per year. On Wednesday, Bernstein Research’s Craig Moffett noted Time Warner Cable will stop paying Sprint to handle its VoIP traffic. Sprint’s stock fluctuated after that memo was released.

Time Warner confirmed the report to the Kansas City Business Journal. Time Warner plans to bring operations in-house and Moffett said he expects the payments to Sprint to start shrinking in the third quarter and be all but gone by the beginning of 2014.

Sprint shares had been trading up to 12 percent higher this week as CFO Robert Brust told investors at different conferences the carrier is “approaching a period of revenue stability,” the Wall Street Journal reported.

But that prediction was shaken by the Time Warner contract revelation and Moffett said the end of that deal will just make Sprint’s sales numbers worse. The wireless carrier is losing thousands of customers each quarter, despite its unlimited pricing plans, the sales of marquee phones such as the Palm Pre, and a big focus on prepaid services through its Virgin Mobile USA and Boost Mobile brands. In fact, Moffett is forecasting the loss of 775,000 postpaid users in 2010’s first fiscal quarter, and said more prepaid subscribers will defect for other, cheaper options.

Moffett’s words came as harsh jolts in a week where Sprint was reveling in some market upswing. But Moffett didn’t ease up,

“Sprint’s fundamentals continue to worsen,” Moffett wrote, reiterating his ‘underperform’ rating. “Absent a serendipitous takeover, the company’s shares ought to reflect this deteriorating performance over time.”

Still, investors liked Sprint’s take. About half an hour before Wall Street’s close, the company’s shares were trading .69 percent higher at $3.65. Sprint’s stock closed at $3.62 per share on Tuesday.

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