Sprint Proves Critical Customer Growth Ahead of Possible Deal

  • No. 4 carrier adds 405,000 new subscribers in holiday period
  • Sprint, T-Mobile seen merging under Trump administration

Sprint Corp. garnered more wireless customers and revenue than expected last quarter, showing progress in its turnaround ahead of an expected consolidation of the industry under President Donald Trump.

Sprint completed its second straight year of subscriber growth after signing up 405,000 new users in the all-important holiday shopping season, more than the 389,778 analysts were expecting. At the same time, the nation’s fourth-largest wireless carrier posted a wider-than-expected loss and cut network spending more than originally forecast.

The results underscore a priority of customer additions over profit and reinvestment in the business, with potential deals looming on the horizon.

Masayoshi Son, who became one of Japan’s wealthiest men by turning Tokyo-based SoftBank Group Corp. into a telecommunications and technology powerhouse, still would like to merge Sprint with its next rival T-Mobile US Inc., Bloomberg reported in August.

SoftBank owns more than 80 percent of Sprint after acquiring the majority stake in 2013, part of Son’s famed plan to build a business empire that can endure through the centuries. The billionaire considered buying T-Mobile in 2014, before abandoning the effort when officials at the U.S. Federal Communications Commission and Justice Department signaled they were against a theoretical merger. Investors have been betting the new Trump administration will usher a less restrictive merger environment, reopening the door to a marriage between the carriers.

Under Chief Executive Office Marcelo Claure, Sprint has used promotions like half-off pricing to stop subscriber losses while pinching pennies on network spending to improve its finances and bide its time. The unprofitable, cash-burning carrier has been forced to use assets like spectrum licenses as collateral to help fund the business.

More Competition

Sprint will face challenges adding customers in 2017, as the wireless price war continues and cable operator Comcast Corp. enters the fray with a wireless service, said Kevin Roe, an analyst with Roe Equity Research LLC.

“Despite the mixed quarterly results, we believe Sprint’s stock will be primarily driven by continued M&A speculation, which certainly heightened since the presidential election,” Roe said.

The shares rose as much as 3.3 percent to $9.41 in New York Tuesday. Investors applauded Sprint’s pullback from financial peril last year, sending the stock up 133 percent.

  • Sales rose to $8.55 billion from $8.1 billion a year earlier. Analysts were looking for $8.3 billion in revenue.
  • The net loss was 12 cents a share, compared with a loss of 21 cents a year earlier. Analysts were expecting an 8-cent loss, according to data compiled by Bloomberg.
  • Monthly subscriber defections rose to 1.67 percent from 1.52 percent in the September quarter. Analysts predicted 1.6 percent churn, according to data compiled by Bloomberg.
  • Network spending is now expected to be $2 billion to $2.3 billion for the fiscal year ending in March, below the $3 billion the company originally forecast. Sprint started the year with a 30 percent cut to capital spending.
  • Postpaid average revenue per user in the third fiscal quarter was $49.70, missing estimates of $49.74.
  • Sprint sees fiscal-year 2017 adjusted earnings before interest, taxes, depreciation and amortization between $9.7 billion and $10 billion, compared with estimates of $9.81 billion.
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