According to a recent USA Today report, Sprint Corporation (S) might consider buying Los Angeles-based wireless Internet provider FreedomPop. The proposed acquisition will help Sprint – the third-largest wireless carrier in the U.S. – to lower its subscriber-acquisition expenses and boost revenue growth. The report also stated that a large U.S. technology firm and a smaller wireless carrier also seem to be interested in FreedomPop.
However, the negotiation is still at an early stage. Industry experts have estimated that FreedomPop may be valued anywhere between $250 million and $450 million. Alternatively, Sprint might only make an investment in FreedomPop for a consideration of around $200 million. Notably, none of the entities have confirmed the deal.
The consideration of the deal appears to be an attempt by Sprint to restructure its growth and investment strategy after it faced regulatory resistance from Federal Communications Commission (FCC) regarding its bid for a merger with T-Mobile US, Inc. (TMUS). This had made it more difficult for the company to catch up with its rivals.
Moreover, Sprint reported disappointing financial results for the second quarter of fiscal 2014. Both the top and the bottom line fell below the respective Zacks Consensus Estimate.
Furthermore, in the reported quarter, the company lost a substantial 272,000 postpaid subscribers. This is a major cause of worry for the company as three of its major competitors, namely, Verizon Communications Inc. (VZ), AT&T Inc. (T) and T-Mobile US gained massive postpaid subscribers over the same period. Also, Sprint’s quarterly total retail pre-paid and postpaid subscribers churn rate deteriorated as it lost several of its high-end users to rivals.
Sprint currently has a Zacks Rank #4 (Sell).
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