Sprint’s Q3: Wireless Yum, Wireline Ick

October 26th, 2011 by · 5 Comments

Fresh off its decision to build its own LTE network, Sprint Nextel (NYSE:S, news, filings) reported its Q3 earnings this morning.  Revenues of $8.33B were slightly on the light side, while loss per share of $0.10 was better than expected.  Their cash levels checked in at $4B, enough to make good progress on that LTE buildout assuming they can refinance the $2.3B due in March.  The story diverges, however, when looking at the company’s wireless and wireline divisions individually.

On the wireless side, they added just under 1.3M total net wireless subscribers, with 304K net postpaid additions for the Sprint brand, 485K on the prepaid side, and 835K from wholesale and affiliates. That was the best they’ve done in a long while, although net postpaid subscribers still managed to fall by 44K. That gives them 53M in total, 32.9M of whom were postpaid. Adjusted OIBDA of $1.214B was 17.6% of revenue, and they spent $647M on capex during the quarter.

In the company’s smaller wireline business, revenues fell to $1.062B for the third quarter, down 15% over the prior year and 3% sequentially, which was expected due to voice pricing pressure as well as the TW Cable VoIP that has been migrating off their network. However, OIBDA fell sharply to $184M, as operating expenses were flat in the face of declining revenue. That’s an adjusted OIBDA margin of just 17.3% now.  Perhaps Sprint has now reached the point where the fixed costs of their network prevent them from cutting expenses fast enough to keep up with revenue declines?

Sprint also amended their credit facility, adding $150M to the total and modifying the definition of EBITDA to let them add in certain equipment subsidy costs. That last bit obviously has to do with the iPhone 4S, which Sprint started selling (and subsidizing) 12 days ago and upon which they are betting on to give them some real momentum again on the subscriber front.  Can’t have big iPhone sales causing covenant problems… that would have been bad.

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Categories: Financials · Internet Backbones · Wireless

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5 Comments So Far

  • schmuckinsurance says:

    I would doubt JPMorgan will raise its $425M steady state ebitda estimate on Sprint wireline today after those results. With that instant deterioration in profits it’s hard to decide if that makes a deal for that asset more or less likely. All that said, Sprint’s need/willingness to do a deal was always a function of their wireless results so who knows maybe wireline results are irrelevant – Sprint at least thinks so.

  • Sprint is priced as if it is going BK says:

    I don’t know if there is a more inept management team in the Telecom space then the idiots who run Sprint. When ever they open their mouths the stock immediately tanks.

  • schmuckinsurance says:

    This is just a scary thing to read, “Sprint projects funding needs of $5-7 billion through 2015, which it expects to cover with $4 billion of refinancing.” What we have learned in the past few years is that needing to rollover debt on worse terms and needing additional extra funding in addition has been a bitter cocktail.

    Meanwhile, the asset base to bridge the gap: 54% stake in CLWR, enough said and the wireline division which I think could go for as low as $2.5B. The worst part is the bond investor knows this and any time you enter the negotiation from a position of weakness terms are going to be unsettling which will raise their interest expense further depressing their fcf and increasing their funding need which is probably being priced off today’s low interest rates.

    They need to start raising prices stat and pray they don’t get NFLX’d or they need a foreign PTT.

  • Carlk says:

    $2.5B for wire line seems about right for a rapidly declining voice business in free fall.

    Although just 62.5 cents on the current revenue run rate, there is one carrier whose efficient network will at least be able to manage it for cash while expanding the customer base to more innovative, on net services, according to their own backbone.

    “Bring it on!,” and keep “smoking” Dan Hesse out of his hiding hole somewhere in Iraq or Afghanistan, or maybe it’s Pakistan, it seems! 🙂

  • Anonymous says:

    When Craig Moffett has nice things to say about Sprint, you have to think they are doing something right…

    Sanford Bernstein analyst Craig Moffett said Sprint third-quarter results were “fairly good.” If the company can straighten out its network strategy and its Clearwire relationship, investors might start to look past the financing needs of the next two years and toward the benefits that should kick in in 2014, he said.

    “For the first time in a year, expectations are appropriately low, and there are now at least a few glimmers of hope,” Moffett said.

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