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Sprint Corporation Message Board

  • invest2bfree invest2bfree Apr 22, 2012 12:15 PM Flag

    Credit Suisse:Raising EBITDA Estimates On Higher ARPU And Lower Network Vision Expense

    What is new: We are increasing our EBITDA estimate for 1Q12 and for the full
    year. We are now well above consensus for both and above guidance for the full
    year. The two biggest drivers of the change stem from higher ARPU growth and
    lower Network Vision expenses.
    Estimate changes: We increased wireless service revenue due mostly to higher
    ARPU (7% growth in 1Q12 from 5.6% previously). We had been
    underestimating the continued benefit from the $10 price increase. We
    increased consolidated EBITDA to $1.06BN from $847MM for 1Q12 driven by
    higher ARPU and lower Network Vision expenses. There are two parts to the
    Network Vision change: 1) we lowered our estimate for the Network Vision drag
    in 2012 because the company is recapturing more iDEN subs than we had
    expected; 2) we adjusted the timing of costs; they will be more back-end
    weighted than we previously expected. We increased 2012 EBITDA to $3.98BN
    from $3.83BN (consensus is $3.75BN; guidance is $3.7-3.9BN).
    Impact to thesis: We believe Sprint has more upside than any other stock in our
    universe over the next 3-5 years; however, we have been more cautious on the
    near-term due to higher churn. These changes have no impact on our long-term
    view; however, a smaller FCF drag in the near-term yields a greater margin for
    error as Sprint navigates the network upgrade while absorbing margin pressure
    from iPhone sales. Although we remain concerned about churn, a greater
    margin for error lowers the risk that higher churn poses to our long-term thesis.

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