Sprint's Dangerous Assumptions
John Zhang • 47 Comments
John Zhang • 47 Comments
Mon, Aug. 29, 2:57 PM
- T-Mobile (TMUS +2%) earned an upgrade to Outperform from Wells Fargo, with its "primary focus" on cash flow.
- The carrier is approaching a "hockey stick" move in free cash flow generation, analyst Jennifer Fritzsche says, with no ill effect from spectrum spending in FCC auctions.
- Wells has a $54 price target on T-Mobile, implying 15% upside from today's price.
- She sees $1B in free cash flow in fiscal 2016, followed by $2.6B in F2017 and $3.7B in F2018. That's on a base assumption the company spends $7B on spectrum, but in her model even if the company spends $8.3B, it would still mean almost $3/share in FCF in 2017.
- Fritzsche's top pick in the sector is still Sprint ("We still can give a longer catalyst list for Sprint"), though the firm expects both Sprint (S +1.5%) and T-Mobile stock to do well based on different metrics.
Mon, Aug. 29, 11:14 AM
- Buffeted by some criticism over its all-unlimited data move, T-Mobile (TMUS +1.8%) has issued changes to the new T-Mobile One plans with T-Mobile One Plus, with the plans launching five days sooner, this Thursday.
- Following criticism of its tethering speed, T-Mobile says it's upgraded hotspot speed on its standard plan to 3G, from a planned 2G. In addition, while mainline customers will get unlimited video "optimized" at 480p, the company will offer HD "day passes" for $3/day, allowing customers to stream unlimited HD video in a 24-hour period. Those passes will arrive in October.
- Targeted at its heavier-use customers, the T-Mobile One Plus plans will offer unlimited 4G LTE hotspot data, unlimited HD day passes, and double the speed when abroad (3G), for $25 more per line (over the $70/month for the one-line plan).
- The quick tweaks are part of T-Mobile's "Shut up and Listen" approach, says CEO John Legere -- "I’ve said it before and I’ll say it again – the best way to run your company is to shut up, listen to your customers, and then do what they say!" -- but no doubt T-Mobile was also giving a listen to Sprint (S +0.4%), which had created a high-end data-hungry version of its unlimited plan on Friday.
Fri, Aug. 26, 2:51 PM
- With wireless providers re-boarding a bandwagon bound for unlimited data, Sprint (S -1.4%) is already adding to its most recent effort (and giving a test to its network strength) with a high-end alternative.
- The carrier is rolling out "Unlimited Freedom Premium," a variation of last week's "Unlimited Freedom" plan targeted at data-hungry consumers.
- The plan offers unlimited HD (up to 1080p+) streaming videos, HD music streaming at up to 1.5 Mbps and gaming streaming at up to 8 Mbps, for $80/month for one line (or $140/month for two).
- Sprint's offering the options on a trial basis through October for all who sign up to last week's Unlimited Freedom plan -- which offers unlimited talk, text and (throttled) data for $60/month.
Wed, Aug. 24, 7:50 PM
- The first benchmark has been hit for closing the FCC's broadcast incentive spectrum auction, but the second benchmark will be a harder task.
- Bids have reached $16.3B after 15 rounds in the forward auction, which began last week as a second phase following an earlier reverse auction.
- That's exceeded the $15.9B total the FCC set as the first benchmark for closing -- but the other benchmark is $88.38B, which the FCC needs to pay broadcasters who set that price in the reverse auction as well as cover costs.
- There's still time, particularly with the price on the blocks rising by 5% a day, John Eggerton notes. But falling short of the $88.38B could mean reopening reverse auction rounds and a completion delayed into next year.
- Spectrum players: VZ, T, TMUS, S, DISH, SBGI, EVC, CMCSA, CHTR, NXST, CBS, MEG
Thu, Aug. 18, 10:44 AM
- With T-Mobile (TMUS +0.7%) declaring an "end to data plans" in its new unlimited-plan push today, Sprint (NYSE:S) is hitting back with an "Unlimited Freedom" plan: Unlimited talk, text and data for $60/month, $10 cheaper than the one-line price at T-Mobile.
- Sprint's new unlimited plan costs $100/month for two lines (vs. $120 for the two lines in T-Mobile's new plan).
- Unveiled in a "tweetstorm" from Sprint chief Marcelo Claure, the plan nominally costs the same for four lines as T-Mobile's ($160). Also like T-Mobile, it promises "optimization" for streaming video, gaming and music -- the notorious data hogs of modern mobile phone usage.
- Sprint was said to be working on a revamp of its unlimited-data offering when news came of a surprise conference call from T-Mobile this morning, at which it introduced its all-in plan.
- Naturally, the dueling plans were accompanied by Twitter sniping between Sprint's Claure and T-Mobile's combative CEO John Legere. "Sounds like a crappy plan to me," Claure tweeted in response to T-Mobile's news, while Legere replied "It takes 5 mins to copy-paste... and a lot longer to build the right network." Food for thought as observers mull whether a peaceful merger is possible.
Wed, Aug. 17, 1:32 PM
- Detailing its report on new merger chatter around Sprint (S -1.5%) and T-Mobile (TMUS +0.5%), Bloomberg notes that Masayoshi Son -- the mogul at the head of SoftBank (OTCPK:SFTBY -2.3%) who abandoned a merger bid before -- will likely try the combination again if he thinks a new head of the FCC is amenable.
- That agency head holds key power, with the threat of putting such a proposed deal into an administrative hearing, which would postpone action indefinitely. A similar threat caused Comcast to drop its proposed takeover of Time Warner Cable. Son has indicated he would legally challenge any Justice Dept. opposition.
- Shares of Sprint and T-Mobile made positive moves of 3% and 2.5% respectively in the span of a few minutes before pulling back.
- Son could pursue the argument that Sprint will never be a legitimate fourth competitor in the market alone, but that may not fly, says Public Knowledge's Gene Kimmelman. “You would need to see a pretty significant reversal of fortunes across both companies -- Sprint and T-Mobile -- for the antitrust enforcers to change their views ... You’d have to see a clear demonstration of a company in jeopardy.”
- A Trump administration, though, could mean "a whole new ball game" with companies like Sprint rolling the dice, Kimmelman says.
- “The rule of thumb is that Democratic administrations will allow an industry to consolidate down to four players, and Republicans will let an industry go down to three,” says analyst Roger Entner. “Masa has to hope that the next president’s name is Donald."
- Talks between the two companies are forbidden as of now, with the FCC's broadcast incentive spectrum auction going on (and looking more likely to run into 2017).
Wed, Aug. 17, 12:44 PM
- Sprint (NYSE:S), down nearly 3% on the day, made a midday spike back to the flat line on yet another resurgence of merger rumors -- though, just like that, the spike is gone and Sprint is off 1.8% again.
- Bloomberg is saying that Masayoshi Son of Sprint owner SoftBank (OTCPK:SFTBY) is still "holding out hope" to combine Sprint with T-Mobile (TMUS -0.2%) -- which also spiked into positive ground before an immediate pullback.
- Conventional wisdom has it that the previous outbreaks of Sprint/T-Mobile rumors were put to rest with no possibility of a combination at least until a new U.S. presidential administration.
Tue, Aug. 16, 6:29 PM
- Goldman Sachs has reiterated its Neutral rating on Sprint (S -1.6%) but has a somewhat more positive stance on its bonds, which have been outperformed by its equity.
- Shares are up 33% since the company beat expectations in its fiscal Q1 earnings and are up 67% YTD, and the company's fundamentals back up those moves, says Goldman's John Marshall.
- But the carrier is unlikely to generate significant free cash flow next year even if it does keep growing EBITDA: “The key reason is that Sprint plans on materially densifying its wireless network, meaning it intends to deploy tens of thousands of ‘small cells’ in order to boost capacity using its high frequency 2.5 GHz spectrum licenses.”
- But until the recent outperformance, Sprint's stocks and bonds tended to move in line. The move in its five-year credit-default swap spread has been only one-fourth the equity move, he says, taking a Constructive stance on the company's credit.
Tue, Aug. 16, 10:26 AM
- A major FCC auction of wireless airwaves just entered its second phase.
- The forward auction in the FCC's broadcast incentive spectrum sale has begun, with Comcast (CMCSA -0.1%) and Dish Network (DISH -0.8%) among those joining the usual spectrum suspects: AT&T (T -0.9%), Verizon (VZ -0.6%), and T-Mobile (TMUS +0.1%), but not Sprint (S +0.4%), which is sitting this out. Of about 100 parties eligible to bid, 62 have been certified by the FCC.
- That follows the reverse auction, where broadcasters set up blocks of spectrum they'll be selling to be reallocated for wireless carrier use.
- This phase represents a challenge, now that the reverse auction's price has been set at $86.4B. With costs, the FCC needs to raise $88B; if the forward auction doesn't reach that height, the reverse auction will need to be reopened to lower its price, which would also cut spectrum sold -- and likely drag the entire process into 2017.
- Broadcast players: SBGI, EVC, NXST, CBS, MEG
- Previously: Next phase of FCC spectrum auction likely to start mid-July (Jul. 01 2016)
Thu, Aug. 11, 7:29 PM
- AT&T (T +0.4%) is joining prepaid rivals in bringing family-plan options to its pay-ahead service.
- The company will offer discounted multi-line plans on its GoPhone line, for customers who buy its $45/month or $60/month plans.
- Customers can receive a $5/month discount on additional lines, up to $20/month of discounts (five lines total). The $45 plan already offers unlimited talk/text and 3 GB of high-speed data, while the $60 plan has 6 GB of data instead.
- The new discounts bring AT&T more in line with multi-line prepaid plans offered by Boost Mobile (S -1%) and MetroPCS (TMUS -0.8%).
Wed, Aug. 10, 2:35 PM
- In another victory for broadband Internet providers, a federal appeals court ruled in favor of two states seeking to set limits on municipal broadband networks.
- The FCC had sought to pre-empt state laws that put onerous restrictions on cities' rights to build and expand their own high-speed networks -- which can reduce demand from private-sector Internet service providers.
- The appeals court said the FCC couldn't block Tennessee and North Carolina from restricting cities that were seeking to expand their muni networks.
- Updated 2:45 p.m.: FCC Chairman Tom Wheeler in a statement: "The efforts of communities wanting better broadband should not be thwarted by the political power of those who, by protecting their monopoly, have failed to deliver acceptable service at an acceptable price. The FCC’s mandate is to make sure that Americans have access to the best possible broadband."
- U.S. ISPs/carriers: VZ, T, CMCSA, OTCPK:ATCEY, S, TMUS, WIN, CTL, FTR, CHTR, CCOI
Mon, Aug. 8, 2:01 PM
- Swelling demand for a new iPhone is likely not only to boost Apple, but also to send subscribers to T-Mobile (TMUS -0.2%) and Sprint (S +0.6%), according to a survey from New Street Research.
- Some 10% of the firm's respondents suggest they plan to switch carriers in the next few months, suggesting industry churn of about 2.5% in Q4, it said.
- And switching activity benefits the "share takers" vs. the share losers -- AT&T (T -0.6%) and Verizon (VZ -0.1%).
- Those two sector leaders have been focusing on more profitable customers, whereas Sprint and T-Mobile are trying to take customer share from the big two.
- Some 22% of respondents said they would buy the new iPhone upon release or within the next few months; of those 5% plan to switch carriers in doing so. And 25% of respondents are specifically waiting for a new iPhone to upgrade their device.
Fri, Jul. 29, 6:37 PM
- A deal extension with Sprint (S +2.4%) is a "positive" for Ericsson (ERIC +0.4%), says Raymond James, but it's difficult to say just how positive.
- An extension of the companies' 2009 deal means that Sprint will take on some Ericsson employees as Ericsson provides "some multi-vendor services" on Sprint's big network expansion.
- Ericsson lost out on its infrastructure position in the deal, giving way to Samsung and Alcatel-Lucent, but held on to managed services, Raymond James analyst Simon Leopold notes.
- "In 2009, Sprint had fewer subscribers at 48M (Sprint 32M, Nextel 12M, Wholesale 4M), vs. 59M now (Sprint 45M, Wholesale 14M), which makes us hopeful that the value is meaningful, but we suspect the scope has changed, making estimation difficult," he says.
- Managed Service revenue has grown at Ericsson from 24.5B Swedish kronor (about $2.9B) in 2011 to 31.8B kronor in 2015.
- Leopold has an Underperform rating on the shares.
Fri, Jul. 29, 10:27 AM
- After losing a decision from a three-judge panel in June, challengers of the FCC's Open Internet order (led by trade group USTelecom) are requesting the full Court of Appeals for D.C. to reverse course and consider striking down the order.
- USTelecom, joined by CenturyLink (NYSE:CTL), is objecting to the net neutrality orders that would regulate Internet providers as common carriers under Title II. It's requested an en banc review of the legal challenges at that court.
- Those two are joined in the challenges by wireless group CTIA as well as cable association NCTA.
- Legal challenges to the rules mounted last year starting the day after the FCC voted on the matter.
- Related tickers: T, VZ, TMUS, S, CMCSA, CHTR, OTCPK:ATCEY, CTL, FTR, CCOI, DISH
Wed, Jul. 27, 5:56 PM
- Ericsson (ERIC +0.4%) and Sprint (S -7.4%) renewed parts of a managed services deal that will include Sprint taking on some Ericsson employees.
- Terms are undisclosed, but that means Ericsson will provide "some multi-vendor services" as part of work on Sprint's network project.
- The deal is an extension of an original network outsourcing arrangement made in 2009, when 6,000 employees were transferred from Sprint to Ericsson as the latter took over management of the CDMA, iDEN and wireline networks.
- Capex spending and planning has been on the decline at Sprint. In its most recent earnings report, the carrier reduced guidance for spending to about $3B for the full year.
Mon, Jul. 25, 3:00 PM