Sprint's Dangerous Assumptions
John Zhang • 47 Comments
John Zhang • 47 Comments
Thu, Nov. 17, 1:18 PM
- After hanging near 52-week lows, Globalstar (NASDAQ:GSAT) has moved up 8.9% after an FCC ex parte filing indicates support from Sprint (S -1.4%) for a revised proposal covering Globalstar's Terrestrial Low-Power Service.
- The two companies jointly urged the FCC to adopt the revised plan for TLPS in Globalstar's licensed spectrum at 2483.5-2495 MHz, which features a revised out-of-band emissions limit.
- The revisions came amid concerns that TLPS might raise interference issues for providers like Sprint. "In the event that its low-power terrestrial operations at 2483.5-2495 MHz causes harmful interference to BRS or EBS systems above 2496 MHz, Globalstar will meet its absolute obligation as an ancillary terrestrial component licensee to mitigate and resolve such interference," the filing says.
- "Low-power terrestrial use of this band will expand the nation’s broadband spectrum supply and should improve the quality of wireless broadband for American consumers," the filing notes.
Tue, Nov. 15, 4:43 PM
- Conversations about Sprint (S +3.2%) and T-Mobile (TMUS +1%) getting together in a merger, to combine their struggles against the top two wireless providers, are running into one problem, according to Citi: The two upstarts aren't struggling as much as before.
- Operational rebounds at Sprint and T-Mobile will make for a harder case before regulators who would have to be persuaded to sign off, the firm says. An attempt to merge in 2014 was denied by authorities.
- "We think Sprint and T-Mobile are more likely than not to reconsider a merger scenario, but the (TV spectrum) auction, other strategic options, and regulatory complexities may slow down any attempt during 2017," writes analyst Michael Rollins.
- T-Mobile led the big four carriers with 851,000 net adds in branded postpaid phones, and added 684,000 net subs in branded prepaid to boot. Sprint, meanwhile, added 347,000 net postpaid phone subs in a rebound quarter.
- "We come back to an essential issue that we believe hurt the companies' prospects for consolidation in the last go-around -- if it's not broken, why fix it?" Rollins says.
Thu, Nov. 10, 12:11 PM
- With telecom consolidation making up one of the post-election storylines in the U.S. -- in particular, whether a new administration changes the calculus for a merger at U.S. unit T-Mobile (NASDAQ:TMUS) -- Deutsche Telekom (OTCQX:DTEGY -2%) says it's too early to tell whether a Trump administration would be positive for M&A.
- "The market reacted heavily," said DT CEO Tim Hoettges after T-Mobile stock hit an all-time high (it's now backed off 2.8%).
- A deal to combine T-Mobile with Sprint (S -0.9%) was nixed by regulators two years ago.
- DT will keep an open mind, and believes a U.S. mobile merger would be "huge," but "It is just far too early to speculate what the new administration would look like," Hoettges says.
- Earlier, Deutsche Telekom met expectations with its Q3 results largely due to performance at T-Mobile.
Wed, Nov. 9, 3:05 PM
Wed, Nov. 9, 11:34 AM
- While Time Warner is trading lower as investors digest a slimmer chance of a buyout by AT&T under a Trump administration, Sprint (NYSE:S) -- a company long thought to again become a merger prospect after a change in the White House -- is up 12.5% and hitting two-year highs today.
- Its oft-discussed merger matchup partner, T-Mobile (NASDAQ:TMUS) is up 3.8%.
- Meanwhile, changes are likely coming to the FCC, Wells Fargo argues: It will at least be more conservative, if not working under new leadership soon; expecting Chairman Tom Wheeler to stay a full term is "no longer realistic."
- "If the rhetoric of those surrounding Trump’s campaign rings true, we can expect a Republican FCC to make a big push to roll back some of the regulations put in place under President Obama such as the Title II/Net Neutrality rules," writes analyst Jennifer Fritzsche. "There may also be a push to roll back some or all of what the FCC just did on privacy."
- "It’s unclear whether Chairman Wheeler will be able to act on the open items related to Business Data Services or set top box reform before he departs and if he does not, some suggest a Republican FCC will reverse course on these two items. There is also a big question on how a Trump FCC will view transactions including the recently announced T/TWX merger and the LVLT/CTL transaction."
- LVLT +0.4%; CTL +0.5%. TWX -1%. Names tied to net neutrality: T, VZ, CMCSA, CHTR, OTCPK:ATCEY, CTL, FTR, CCOI, DISH.
Thu, Oct. 27, 2:02 PM
- The FCC split on party lines again today in adopting tough new privacy regulations on broadband Internet providers, rules that require an opt-in before sharing most customer data.
- That could present a problem growing advertising for big providers including Comcast (NASDAQ:CMCSA), Charter (NASDAQ:CHTR), AT&T (NYSE:T) and Verizon (NYSE:VZ).
- The vote passed 3-2 with strong dissents from the panel's two Republican commissioners. More public information (names, addresses) will be treated leniently, but providers will need to ask permission before sharing more sensitive data (like phone-tracked location, or sites visited and apps used).
- The new rules, while scaled back, have drawn heavy criticism from cable/telecom and advertising sectors, with companies that fret that the move will restructure the Internet's free-content approach.
- Other players: OTCPK:ATCEY, FTR, CTL, WIN, S, TMUS, CCOI
Wed, Oct. 26, 3:20 PM
- With AT&T beginning a long journey to acquire Time Warner, is T-Mobile (TMUS +0.7%) the next big acquisition target in the media/telecom space? Analysts are talking up the carrier's prospects after it logged another successful quarter.
- For its part, T-Mobile has been and still is "very interested" in strategic options, COO Mike Sievert says.
- "The takeout target over the next 12 months has got to be T-Mobile," says New Street Research's Spencer Kurn, noting potential suitors in Comcast (NASDAQ:CMCSA) -- which is exercising a clause with Verizon to launch MVNO service -- as well as Dish Network (NASDAQ:DISH) and America Movil (NYSE:AMX).
- Dish has a lot of spectrum but no wireless business -- and it's lost a potential buyer in AT&T, which now has its hands full with Time Warner, notes BTIG's Walt Piecyk.
- Rival Sprint (S -1.8%) could be a takeover target as well, as CEO Marcelo Claure noted "we've had a lot of bankers placing more calls than usual over the weekend" in yesterday's earnings call.
Tue, Oct. 25, 10:40 AM
- After touching what would have been a 52-week high in premarket action, Sprint (NYSE:S) is off 6.7% after posting fiscal Q2 earnings where it cut losses substantially and beat expectations for profits and revenues.
- Postpaid phone churn hit a company record low of 1.37%, the seventh straight quarter of Y/Y improvement. But net postpaid phone adds of 347,000 disappointed some analysts despite doubling Q/Q.
- Total platform net adds were 740,000, which along with postpaid phone adds incorporates wholesale and affiliate net adds of 823,000, and prepaid net losses of 427,000.
- Adjusted free cash flow was $707M, vs. a loss of $100M a year ago, an $807M swing Y/Y.
- It's raising guidance on operating income for 2016, to $1.2B-$1.7B from previous expectations for $1B-$1.5B, and reiterating expectations for EBITDA of $9.5B-$10B, and adjusted free cash flow around break-even.
- Cash capex is now expected below $3B, as the company has better visibility into payment timing tied to network densification.
- Press Release
Tue, Oct. 25, 7:32 AM
Mon, Oct. 24, 6:22 PM
- AT&T's deal to acquire Time Warner is "good for T-Mobile (TMUS +9.5%) in the short and medium term," says T-Mobile chief John Legere today, expecting a distraction at his blue whale of a nemesis while his underdog firm racks up new subscribers.
- T-Mobile today logged net adds of 851,000 subscribers in branded postpaid phones, while AT&T lost 268,000 this quarter. For its part, Verizon lost 36,000 net subs in branded postpaid phones. (Sprint, the No. 4 carrier, added 347,000.)
- The Time Warner deal is a "bold move. It's going to cause acceleration," Legere says, but noting that AT&T could get "further defocused" on the wireless business as it diversifies.
- The interesting question going forward: Will regulators have a fresh stance on a once-squelched merger of T-Mobile with Sprint (S +5.7%) now that AT&T is making a move toward becoming a telecom/media behemoth?
- T-Mobile stock hit a nine-year high today. Sprint reports earnings tomorrow before the bell.
- Previously: T-Mobile up 7.4% on subscriber boost, Q3 profit beat (Oct. 24 2016)
- Previously: T-Mobile US beats by $0.04, misses on revenue (Oct. 24 2016)
Mon, Oct. 24, 5:30 PM
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Thu, Oct. 20, 4:38 PM
- Sprint (S -2.3%) has priced the debt backed by its wireless spectrum.
- Through three special-purpose subsidiaries, Sprint priced $3.5B in 3.36% senior secured notes in a private transaction.
- The notes are issued at 99.99834% of principal; have an interest-only period followed by quarterly amortizations beginning Dec. 20, 2017; have a weighted average life of about three years and "anticipated repayment date" of Sept. 20, 2021.
- The notes were expected to yield about 3.5% after $30B in orders piled in.
- The subsidiaries will take over about 14% of Sprint's total spectrum holdings (on MHz-pops basis) to serve as collateral for the notes. Rental payments from Sprint will be sufficient to service the notes, it says.
- The central value of the company's spectrum portfolio as of June 30 is estimated at $16.4B.
- Previously: Sprint to raise $3.5B in new spectrum sale/leaseback (Oct. 12 2016)
- Previously: Wells Fargo: Sprint's spectrum alone could be worth $21/share; S +3.4% (Oct. 14 2016)
Thu, Oct. 20, 4:16 AM
- In a novel initiative, Sprint (NYSE:S) is set to issue $3.5B in five-year bonds that are backed by its wireless spectrum, which the telecom operator values at $16.4B.
- Investors seem to like the idea, with orders hitting $30B.
- The first-of-its-kind deal will allow Sprint to slash its borrowing costs. The paper is expected to yield 3.5% and the telecom provider plans to use the money to repay maturing debt. This could cut its financing costs and boost cash flows by an estimated $200M a year.
- The debt is receiving investment grade status from Fitch and Moody’s despite Sprint itself being rated as junk.
- ETFs: LQD, VCIT, CORP, CIU, CSI, CRED, ITR, QLTA, COBO, FCOR, CBND, SKOR, IGIH, WFIG
Tue, Oct. 18, 8:37 AM
- The company sees FQ2 net operating revenue of $8.25B, up 3% Y/Y, and wireless net operating revenue of $7.85B up nearly 5%.
- Net loss of $142M vs. $585M a year ago, with this quarter's result boosted by a non-cash gain of $218M.
- Operating income of $622M vs. a $2M loss a year ago, again boosted by that non-cash gain ($354M pretax).
- Adjusted EBITDA of $2.35B up 17% Y/Y.
- Adjusted free cash flow of $707M vs. a negative $100M a year ago.
- Total Sprint platform net additions of 740K during quarter, including postpaid net additions of 344K, prepaid net losses of 427K, and wholesale and affiliate net additions of 823K.
- Total postpaid churn of 1.52% slipped two basis points, and postpaid phone churn of 1.37% was lowest in company history.
- S +0.7% premarket
Fri, Oct. 14, 12:56 PM
- Echoing a chorus of frustrated investors, Wells Fargo's Jennifer Fritsche figures that Sprint (NYSE:S) is worth $21/share in spectrum value alone.
- That's after accounting for $32B in debt. Shares are up 3.4% to $7 and the stock has hit a two-year high today in response.
- Crunching numbers on Sprint's third and latest sale/leaseback on spectrum, Fritsche says the price tag it puts on the airwaves is higher than the Street figured: If 14% of the spectrum is worth $16.4B, then total value comes to about $117B.
- The spectrum deal lowers average cost of debt and should help cash flow in the short term, she says. “Once Sprint gets beyond the December payment ($2.3B due in 12/2016) its next three maturities are coupons which are between 8 3/8% and 9 1/8% ... Therefore, this deal could be immediately be accretive on a FCF basis, as Sprint should be able to significantly lower its interest expense and put its Net Operating Losses (NOLs) to work.”
- She also has raised estimates for postpaid phone additions to 275,000 from a previous 200,000, vs. consensus expectations for 230,000.
Wed, Oct. 12, 9:10 AM
- Sprint (NYSE:S) is up 1.2% premarket following a new plan to raise billions from a spectrum sale/leaseback.
- For the third time, the company will mortgage spectrum -- about 14% of its airwaves, an amount the company estimates as worth $16.4B. It won't borrow all that at first, though, looking to raise about $3.5B.
- That would provide needed cash in its current crunch. Negative cash flow came to $3.17B for the fiscal year ended in March.
- Through three special-purpose subsidiaries, Sprint will use a portfolio of FCC licenses and some third-party leases (in 2.5 GHz and 1.9 GHz) in a sale and long-term leaseback. The spectrum in question is used in about 77% of Sprint's 2.5 GHz enabled sites, and in about 33% of its 1.9 GHz sites.
- It expects the notes to be rated investment grade by Moody's and Fitch.