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Sprint Redeems Debt, But Move is Questionable

|Includes:AAPL, Sprint Corporation (S)

Sprint (NYSE:S) has announced that it will be retiring $2.25 billion of debt that was scheduled to be due in March of 2012, but the move seems rather questionable.

Sprint is redeeming this pile of debt, which carried a weighted average interest rate of 7.84%. But it just got $4 billion of new debt at a weighted average interest rate of 9.625%. So they are trading in lower debt for higher debt? That does seem a bit backwards.

Sprint has said that it needs new financing to upgrade its network and infrastructure, thanks to the addition of Apple's IPhone to its lineup. The new debt is not due for 7-10 years, but it begs the question, if they were getting the new debt to retire the old, why go so far out on the yield curve and pay so much interest. If the IPhone will help them so much, why not get some short term debt (2 to 4 years), and pay less interest?

Sprint will always be a mystery to me, and that's why I've said I wouldn't buy the company until it hits $1.75 at the earliest.

Stocks: S, AAPL