Sprint Posts Q3 2017 Amid Mixed Reaction

On Friday, Sprint reported operating results for the third quarter of fiscal year 2017, including its highest retail net additions in nearly three years, with postpaid net additions of 256,000 and prepaid net additions of 63,000. The company also reported its eighth consecutive quarter of operating income and the highest fiscal third quarter adjusted EBITDA in 11 years.

“This momentum, along with a continued focus on the cost structure, is driving improvements in profitability metrics and adjusted free cash flow,” said Sprint CEO Marcelo Claure.

Sprint said it is “unlocking the value of the largest mobile broadband spectrum holdings in the U.S. and its Next-Gen Network is designed to drive significant improvements to network performance and the customer experience by investing in four main areas,”

  • Upgrade existing towers to leverage all three of the company’s spectrum bands – 800 MHz, 1.9 GHz and 2.5 GHz – for faster, more reliable service.
  • Build thousands of new cell sites to expand its coverage footprint and extend coverage to more popular customer destinations.
  • Add more small cells — including Sprint Magic Boxes, mini-macros and strand mounts to densify every major market and significantly boost capacity and data speeds – and leverage the recent strategic agreements with Altice and Cox. The company has already deployed more than 80,000 Sprint Magic Boxes in approximately 200 cities across the country and plans to deploy more than 1 million as part of its multi-year roadmap.
  • Deploy game-changing 64T64R Massive MIMO 2.5 GHz radios to increase capacity up to 10 times that of current LTE systems and increase data speeds for more customers in high-traffic locations. Massive MIMO, a key enabler for 5G, will allow the company to support both LTE and 5G NR (New Radio) modes simultaneously without additional tower climbs.

Market analysts had differing reactions to the presentation:

“Sprint posted +184k postpaid phone adds, which is substantially better than many feared (or hoped for) after the other three carriers all reported better than expected results,” said Jonathan Chaplin, Analyst of New Street Research.  “Some had come to expect a decline in postpaid phones. Furthermore, ARPU, churn and EBITDA were all solid; it doesn’t seem like they overpaid for sub growth (unlike AT&T). Guidance was solid too. We would expect the stock to recover some of its losses from a tough start to the year.”

“Sprint’s stretch of unsustainability dates all the way back to the merger with Nextel in 2005,” said Craig Moffett of MoffettNathanson. “Twelve years later, they have endured falling subscribership, declining ARPU, falling revenues, soaring debt, wildly unprofitable promotions, repeated management changes, failed merger attempts (or at least flirtations), and seemingly perpetual under-investment in their network.  Through it all, and against all odds, they have “sustained.”  But little more.”                                        

February 5, 2018   

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