Sprint Corporation (S) reported second quarter 2013 loss per share of 53 cents, wider than the Zacks Consensus Estimate of a loss of 33 cents. The results also compared unfavorably with loss per share of 46 cents recorded in the second quarter of 2012. Charges related to the Nextel shutdown ($623 million) and accelerated depreciation expenses ($430 million) were responsible for the wider year-over-year loss.
Quarterly operating revenues inched up 0.38% year over year to $8,877 million, surpassing the Zacks Consensus Estimate of $8,793 million on growth in the Sprint wireless platform.
Adjusted OIBDA (operating income/loss before depreciation, amortization, asset impairments and abandonments) was almost flat at $1,294 million. OIBDA margin fell 20 basis points year over year to 17.6%.
Segment Results
Wireless operating revenues increased 1.4% year over year to $8,178 million in the quarter.
Sprint lost approximately 2 million subscribers in the reported quarter, representing a net loss of 1.8 million in retail subscribers and 228,000 in wholesale and affiliate subscribers.
The Sprint platform added 194,000 post-paid customers while the Nextel platform lost 1 million. With regard to prepaid subscription, Sprint lost 486,000 users and the Nextel platform lost 255,000 customers.
At the end of the second quarter, Sprint had approximately 53.588 million customers (including 30.62 million post-paid, 15.25 million prepaid and 7.71 million wholesale and affiliate) compared with 56.386 million in the year-ago quarter.
Wireless post-paid average revenue per unit (ARPU) increased to $63.59 from $60.88 in the year-ago quarter, boosted by higher monthly recurring revenues. Prepaid ARPU increased to $27.02 from $26.59 in the year-ago quarter.
Sprint platform post-paid churn (customer switch) rate was 1.83% in the reported quarter, compared with 1.69% in the year-ago quarter. Sprint platform prepaid churn deteriorated to 5.22% from 3.16% in the prior-year quarter.
During the second quarter, Sprint sold nearly 1.4 million Apple Inc.’s (AAPL) iPhones and about 41% of the iPhone customers were new to Sprint. The company finally shut down its Nextel platform on Jun 30, 2013.
Wireline revenues dropped 8.5% year over year to $910 million owing to poor performances by the voice, Internet and cable units.
Liquidity
At the end of second quarter, Sprint had approximately $5,596 million in cash and cash equivalents compared with $6,351 million in 2012. Net debt increased to $17.8 billion from $16.1 billion at the end of 2012. The company incurred capital expenditure of $1,897 million in the second quarter compared with $1,158 million in the corresponding year-ago quarter.
Guidance
For full-year 2013, Sprint raised its adjusted OIBDA projection between $5.5 billion and $5.7 billion from the previously estimated range of $5.2 billion to $5.5 billion. However, assuming the dilutive impacts of SoftBank and Clearwire transactions of approximately $400 million, adjusted OIBDA is expected in the range of $5.1 billion to $5.3 billion.
Our Take
With the Influx of cash contribution from SoftBank and ongoing success in its Network Vision program, Sprint remains well position to tap potential opportunities in the U.S. wireless market. The company has launched its LTE services in 151 cities, which indicates its growing popularity in advanced wireless platform.
Further, we believe spectrum acquired through the Clearwire takeover and transactions with United States Cellular Corp. (USM) would remain accretive to its infrastructural developments, enabling improved wireless services. However, increased competition from carriers like Verizon Communications Inc. (VZ), heavy investments, and continued wireline margin erosion keep us cautious on the stock. Further, near-term margin will also remain muted by the dilutive impacts of the Network Vision program and re-certification of the Lifeline service.
Sprint currently holds a Zacks Rank #3, implying a Hold rating.
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