Sprint Corp. (S) is the third largest telecom operator in the U.S. providing wireless and wireline services to individuals, business enterprises and government agencies.
We believe the company’s focus on subscriber and revenue growth at the core Sprint platform, through the deployment of its multi-billion dollar restructuring program – Network Vision, will enhance wireless growth prospects. Moreover, Sprint is set to boost its 2.5 GHz network coverage.
Last month, the company launched its new International Value Roaming plan which promises free unlimited international data roaming at up to 2G speeds in 15 selected countries. Sprint aims to lure more customers by mitigating their agony of paying huge data roaming bills. We believe the new plan should help the company reverse customer churn and evade a further plunge in position among the major wireless carriers in the U.S.
Nevertheless, the U.S. telecom industry is facing severe competitive pressure at present. Aggressive pricing competition and higher promotional activities are likely to hurt the company’s financial results. In an effort to expand its customer base, the company is spending heavily on promotion and is also offering lucrative discounts. These strategies are likely to impact the company’s wireless segment EBITDA margin.
Sprint currently carries a Zacks Rank #3 (Hold). The company has generated a substantial negative average earnings surprise of 24.98% in the previous four quarters. We have highlighted some of the key stats from this just-revealed announcement below:
Earnings: Sprint incurs loss in Q4. However, net loss was wider than the Zacks Consensus Estimate. Our consensus estimate called for an adjusted net loss of 4 cents per share and the company reported adjusted net loss was 6 cents per share. Investors should note that these figures take out stock option expenses.
Revenue: Sprint reported total revenue of $8,282 million which lagged our estimate by a significant $164 million.
Key States to Note: In the reported quarter, Sprint added 211,000 retail postpaid connections. At quarter end, the company had 29.706 million retail postpaid connections, down 0.7% year over year. Retail postpaid average revenue per user (ARPU) decreased 10.4% to $56.94 per month. In fourth quarter of fiscal 2014, Sprint also added 546,000 net prepaid connections and 492,000 net wholesale connections.
Stock Price: At the time of writing, the stock price of Sprint was down nearly 1% (5 cents) in the per-market trade on NYSE. Clearly the initial reaction to the release is negative. We believe promotional activities will hurt the company in the near-term. Significant decline in ARPU is a major concern for the company.
Check back later for our full write up on this Sprint earnings report later!
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