Sprint Nextel Remains On Hold

Sprint Nextel (S) is a leading provider of business and wireless communications services in the U.S. The company continues to experience lower revenue due to weakness in its wireless business and associated customer retention problems.

Lower subscriber count coupled with the management’s cautious guidance reflects a disappointing outlook for the remainder of 2008 and early 2009. On a positive note, strong cash flow from operation along with favorable refinancing fostered encouraging balance sheet deleveraging as debt level was reduced. Also, Sprint recently launched its first 4G WiMAX wireless service and plans to rejuvenate its iDEN business.

Although the WiMAX venture (in collaboration with Clearwire) represents a potential differentiator for Sprint, the associated spending for this ubiquitous deployment is expected to restrict earnings performance over the near-term and, therefore, we maintain our Hold rating.

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