Monday, November 3, 2008

Sprint Nextel has $600 million of debt due in May and a whole new set of worries on the horizon.

With 3,750 employees in the Washington area, the firm has been bleeding customers since the two companies merged two years ago. Now with a softening economy and a tightening credit market, the struggle just got that much harder.

At the end of the second quarter, the company had $23 billion in debt. The company must keep its debt at or below a certain percentage of its equity to meet agreements with creditors. If it doesn't meet those ratios, the debt payments can become costlier.

The company does have $3.2 billion in cash on hand. "The real issue is not being in a position where we'll have to borrow," Sprint chief executive Dan Hesse said in a speech last month.

Last spring Hesse cleared the executive decks of the troubled wireless carrier and brought in a tough head of finance, Robert Brust from Eastman Kodak, whom he likes to refer to as Ebenezer Scrooge.

Brust has left no stone unturned in his war against excess spending. To save money, he raised thermostats by one degree in the summer and lowered them by the same amount in the winter, an effort expected to save $200,000 a year. He stopped office supply purchases, removed printers to discourage excess printing and banned purchases of bottled water for group and executive meetings.

So far Hesse's fight has shown some signs of success, with a recent report by Pali Research Group indicating the company's poor customer service record has improved. But the big question is: How can Sprint grow as it continues to lose customers?

Its biggest bet -- a merger with Clearwire on WiMax technology -- is an expensive endeavor that will require massive new cash investments to fulfill its goal of connecting the nation with wireless Internet services comparable to DSL service. The Federal Communications Commission is expected to vote on Sprint's merger with Clearwire tomorrow