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Sprint Corporation Message Board

  • majikline64 majikline64 Oct 28, 2010 9:45 AM Flag

    Credit Suisse:

    What is new: Wireless service revenue grew y / y at last (we only expected
    growth in 4Q). Retail net adds were positive for the first time since 2Q07
    (+364k). Total net adds increased sharply after turning positive last quarter.
    Wireless margins were slightly below our estimate, though entirely due to
    higher adds. In fact, if we adjust for higher adds, underlying margins were
    40bps better than we expected. Finally, mgmt is guiding to improving trends
    in all sub categories in 4Q10.
    Impact to thesis: By all accounts this was a great qtr and better than most
    people expected. Mgmt seems confident that trends will only improve
    further next qtr. We believe the CLWR morass will be resolved positively
    before year-end, removing a critical overhang. Finally, we believe the
    company will announce details of the network transformation plan late this
    year / early next year, and this should be a positive catalyst also.
    Impact to stock: Tough to call because expectations were all over the place
    (stock down in pre-market). Sprint had a strong run into today's results, and
    the stock has sold off hard on better than expected results in the last couple
    of qtrs. This time should be different because we have greater confidence in
    improving trends next qtr (investors initially thought trends would deteriorate
    from 2Q to 3Q because of higher churn), and we have two major positive
    catalysts ahead (CLWR and network RFP). If there is a pull-back…we
    would view it as a gift.
    Valuation: Sprint is trading at an 18% FCF yield compared to peers at 10%
    - 12%. With the turn-around firmly on track and wireless revenue growing
    again, we believe the discount is tough to justify. The only thing holding the
    stock back at this point, in our view is the CLWR overhang.
    Share price performance
    5 6
    Oct-09 Jan-10 Apr-10 Jul-10 Oct-10
    Daily Oct 27, 2009 - Oct 26, 2010, 10/27/09 = US$3.17
    Price Indexed S&P 500
    On 10/26/10 the S&P 500 index closed at 1185.64
    Quarterly EPS Q1 Q2 Q3 Q4
    2009A -0.07 -0.11 -0.15 -0.18
    2010E -0.12 -0.11 -0.15 -0.06
    2011E — — — —
    Financial and valuation metrics
    Year 12/09A 12/10E 12/11E 12/12E

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