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Monday, Aug 19
FBR: Sprint to overbuild capacity in NTELOS territory; NTELOS dives
- FBR's checks indicate Sprint (S +0.6%), flush with SoftBank cash and ramping 4G capex, plans to "overbuild" capacity in territory now covered by a wholesale agreement with Virginia-based regional carrier NTELOS (NTLS -10.6%), unless a "material expense reduction" is negotiated.
- As a result, FBR, which has named NTELOS a top short, sees the company's Sprint-related revenue diving to $82.9M in 2015, and $26.6M in 2016. NTELOS' 2012 Wholesale & Other revenue (mostly Sprint-related) totaled $168.9M (+17% Y/Y).
- The expected decline, in turn, leads FBR to think NTELOS could break its 5:1 leverage covenant ratio by the end of Q3 2015.
- Wells Fargo previously noted that while Sprint's current deal with NTELOS lasts until July '15, Sprint can overbuild starting in 2014.
- Hedge fund manager Mike Bergen estimates at least 75% of NTELOS' EBITDA, and perhaps over 100% of its free cash flow, comes from Sprint. He also thinks the company's spectrum is of little value.