Equity4all

Wireless Carriers: Sprint and T-Mobile

IMHO: S results are relative, relative to their own performance and relative to their competition which is where I believe the focus should be. They compare their churn rate against their own measurement as opposed to an industry wide comparison. They are 100 basis points higher than the 2 leaders T/VZ. Hesse is right about churn being the single most important metric regarding company performance since a 2% churn rate translates into an 11% decline in sales. However, even if he gets the churn rate down to 1%, which I doubt he can accomplish without a severe drop in ARPU or an increase in phone subsidies, that would still translate into a ~5% drop in sales. The have already mined the high-end of the ARPU curve and will eventually deplete the number of customers who can afford $99/month. At their current sales run rate and their debt to EBITDA ratio climbing, they may be close to violating their debt covenants which would not bode well for the equity holders.

Their revenue is declining at >11% y-o-y. Wireline is not a big contributor to gross margins and only comprises ~15% of gross sales revenue.

Qwest leaving for VZ, Embarq leaving for unnamed carrier, Federal government GSA contracts lost, problems with the MVNO, a churn rate that when bi-annualized (assumes 2 year contracts) translates into a 24% defection rate. In order to grow the business they must run faster than 24% adds just to stay even. I don't see that happening.

Again, IMHO, I might look at the bonds but certainly not the stock. I believe that the bonds have more upside than the stock should DH turn this ship around.

One more thing: Leverage works both ways. Nxtl took advantage of high leverage when they were profitable and the stock popped as a result; but, leverage can also magnify and amplify losses. Just something to keep in mind. The time to buy highly leveraged, high beta stocks is in the beginning of an economic recovery. We are nowhere near that point yet. Just my humble opinion.