Sprint Corporation (S) reported fourth quarter 2013 net loss of $1 billion as compared to a loss of $1.3 billion in the year-ago quarter. Higher revenues on the Sprint platform, reduced cost on the Nextel platform, shutdown and lower net subsidy expenses reduced the net loss. For the full year, the company reported net loss of $3,018 million, down from $4,352 million in the prior year.
Quarterly operating revenues inched up 1.5% year over year to $9,142 million and surpassed the Zacks Consensus Estimate of $8,975 million. For the full year, revenues grew marginally to $35.5 billion from $35.4 billion in 2012.
Adjusted EBITDA of $1.15 billion increased 40% year over year in the fourth quarter. In 2013, adjusted EBITDA increased 13% year over year to $5.4 billion.
Segment Results
Wireless operating revenues were $8,483 million in the quarter, up from $8,275 million in the year-ago quarter. The company recorded service revenues of $7,322 million, up from $7,265 million in the year ago quarter thanks to the introduction of new family pricing plans such as new Sprint FramilySM.
Sprint gained approximately 477,000 million subscribers in the reported quarter, representing net addition of 150,000 retail subscribers and gain of 327,000 wholesale and affiliate subscribers.
The Sprint platform gained 219,000 post-paid customers. With regard to prepaid subscription, Sprint lost 69,000 users.
At the end of the fourth quarter, Sprint had approximately 53.9 million customers (comprising 30.2 million post-paid, 15.6 million prepaid and 8.2 million wholesale and affiliate) compared with 53.5 million in the year-ago quarter.
Wireless post-paid average revenue per unit (ARPU) increased to $64.11 from $63.04 in the year-ago quarter backed by higher monthly recurring revenues. Prepaid ARPU increased to $26.78 from $26.30 in the year-ago quarter.
Sprint platform post-paid churn (customer switch) rate was 2.07% in the reported quarter, compared to 1.98% in the year-ago quarter. Sprint platform prepaid churn improved to 3.01% from 3.02% in the prior-year quarter.
During the fourth quarter, Sprint sold 5.6 million smartphones. For the full year, smartphone sales were 20.5 million.
Wireline revenues dropped to $859 million from $949 million in the year-ago quarter owing to poor performances by voice, Internet and cable units.
Liquidity
At the end of fourth quarter, Sprint had approximately $6,364 million in cash and cash equivalents compared with $6,351 million in 2012. Net debt increased to $25.5 billion from $16.1 billion at the end of 2012. The company incurred capital expenditure of $1,901 million in the fourth quarter compared with $1,923 million in the corresponding year-ago quarter.
Guidance
For 2014, the company expects adjusted EBITDA in the range of $6.5 billion and $6.7 billion and capital expenditures of approximately $8 billion.
Our Take
Sprint currently has a Zacks Rank #3 (Hold). We believe Sprint’s near future remains challenged by the dilutive impact of the Network Vision program and subscriber headwinds due to re-certification of the Lifeline service.
However, Sprint’s efforts to taper its losses supported by strong wireless business with reducing churn, improving ARPU, increasing penetration of handsets, service offerings and spectrum acquisitions from Clearwire and United States Cellular Corporation (USM) transactions are encouraging. Nevertheless, increased competition from carriers like Verizon Communications Inc. (VZ) and AT&T Inc. (T) heavy investments, and continued wireline margin erosion keep us cautious on the stock.
Sprint currently has a Zacks Rank #3 (Hold).
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