Sprint Corp. S reported disappointing financial results in the second quarter of fiscal 2015, wherein both the top and the bottom line lagged the Zacks Consensus Estimate. Further, management lowered its outlook and now expects fiscal 2015 adjusted EBITDA (earnings before interest, tax, depreciation and amortization) at the lower end of its previous forecasted range of $7.2 billion — $7.6 billion.
The Zacks Rank #3 (Hold) stock faces fierce competition in the U.S. wireless market from the likes of Verizon Communications Inc. VZ, AT&T Inc. T and T-Mobile US Inc. TMUS. In order to remain competitive, Sprint recently launched several low-priced data and voice plans. As more customers shifted to the company’s monthly leasing plan Sprint faced significant losses. This is because as under this plan, the company had to compensate for the upfront amount which subscribers had been relieved of, as the latter were required to pay only in monthly installments.
Quarterly net loss was $585 million or 15 cents per share compared with a net loss of $765 million or 19 cents per share in the year-ago quarter. Second-quarter adjusted net loss per share of 13 cent was significantly wider-than-the Zacks Consensus Estimate of a loss of 9 cents.
Quarterly total revenue came in at $7,975 million, down 6% year over year and also below the Zacks Consensus Estimate of $8,166 million. Service revenues were $6,880 million, down 7.6% while Equipment revenues totaled $1,095 million, up 5.4%.
Operating expenses were $7,977 million, down 8.1% year over year. Operating loss was $2 million compared with $192 million in the year-ago quarter. Adjusted EBITDA improved 44.9% year over year to $2,008 million. Adjusted EBITDA margin was 29.2% against 18.6% in the year-ago quarter.
Cash Flow
In the second quarter of fiscal 2015, Sprint generated $1,669 million of cash from operations compared with $1,028 million in the prior-year quarter. Quarterly free cash flow was a negative $100 million compared with a negative $75 million in the prior-year quarter.
Liquidity
At the end of the reported quarter, Sprint had $2,075 million of cash and marketable securities against $5,253 million at the end of fiscal 2014. Total debt outstanding, at the end of second-quarter fiscal 2015 was $33,965 million against $33,831 million at the end of fiscal 2014. At quarter end, debt-to-capitalization ratio was 0.61 against 0.60 reported at 2014 end.
Wireless Segment
Total segment revenue was $7,516 million, down 5.2% year over year. Postpaid revenues totaled $4,900 million, down 8.9%. Prepaid revenues were $1,252 million, up 4.6%. Wholesale revenues were $185 million, up 2.2%. Transactions revenues totaled $84 million, down by a substantial 37.8%. Equipment revenues were $1,095 million, up 5.4% year over year.
Wireline Segment
Total segment revenue stood at $609 million, down 14% year over year. Voice revenues totaled $212 million, down 27.9%. Data revenues were $43 million, down 18.9%. Internet revenues were $323 million, down 5%. Other revenues were $31 million, up 47.6% year over year.
Subscribers Statistics
In the reported quarter, Sprint gained 553,000 postpaid subscribers, 866,000 wholesale customers but lost 363,000 prepaid customers. As of Sep 30, 2015, Sprint had 57.868 million wireless customers, up 7.3% year over year. This includes 30.569 million postpaid, 14.977 million prepaid and 12.322 million wholesale customers.
Quarterly total retail postpaid churn rate was 1.54% as against 2.18% in the year-ago quarter. Total retail prepaid churn rate was 5.07% as against 3.76% in the prior-year quarter. Total retail postpaid ARPU (average revenue per user) was $54.02, down 10.8% year over year. Total retail pretpaid ARPU was $27.54, up 1.3% year over year.
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