Sprint Tells FCC it Needs T-Mobile Merger

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Sprint told the FCC despite achieving “substantial” cost savings and stabilizing its financial position, it hasn’t been able to “turn the corner” concerning its core business challenges. Facing declining revenue and subscribers, plus carrying several billion dollars in debt, the carrier says it needs the T-Mobile merger to go through. The Commission recently paused its review of the transaction to review additional material.

In a recent presentation to regulators from executives representing Sprint, T-Mobile, Deutsche Telekom, and Softbank Group Corp., Sprint said it, “has not been able to invest sufficient capital to achieve network performance necessary to attract and retain enough subscribers to improve its scale. It can periodically increase CapEx spending to fund projects, but cannot sustainably spend enough to close the network performance gap with AT&T and Verizon.” 

Sprint has eliminated about $10 billion in annual costs, allowing it to boost near-term profitability. Those cuts include layoffs of 2,000 employees in 2014 (with additional rounds in 2016 and 2018), as well as dropping plans to deploy 12,000 cell sites to support its 2.5 GHz licenses. But cost cutting is nearing its limit and becoming more difficult. The carrier says it abandoned a monopole deployment plan between 2017-2018, and took a $180 million write off in “abandoned sites.”

Sprint can periodically increase CapEx spending to fund projects, but cannot sustainably spend enough to close the network performance gap with AT&T and Verizon. Between January and December 2017, Sprint says it spent $2.51 billion on its network, while T-Mobile US invested $5.24 billion, AT&T spent $9.36 billion and Verizon invested $10.31 billion.

The carrier says financially, it never recovered from challenges stemming from 2005, when Sprint and Nextel merged in a $35 billion transaction. Sprint tells regulators it has lost $37 billion since then, “related to the deal.” It currently carries about $32 billion in net debt. Read the redacted filing here.

October 1, 2018