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Sprint Corporation Message Board

master_finance2003 9 posts  |  Last Activity: Aug 6, 2014 10:06 PM Member since: Nov 1, 2004
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  • master_finance2003 master_finance2003 Aug 6, 2014 10:06 PM Flag

    pumptard, surprisingly I agree with your options. D seems to be the best for both softbank and sprint. Softbank can borrow money cheaply to pay for spectrum and lease it to sprint for favorable rate.

  • master_finance2003 by master_finance2003 Aug 6, 2014 9:06 AM Flag

    like I mentioned previously, new ceo must cut cost by about 2B annually for sprint to remain viable. Sprint needs to spend about 8.5B every year starting next year on capex and interest expense. Sprint cash flow from operation is only 6.5B. It looks like the new ceo was picked to cut costs since his previous experience, procuring and selling handsets is a low margin business. Because of all the gloom and doom, investors did not realize that they have reduced cost by 1.2 B and capex by 1 B and leaving NV1 and NV2 unaffected. Sprint needs to transform itself into the leanest wireless company in the US and offers the lowest price plans. No one can compete on cost and price against Son.

  • master_finance2003 by master_finance2003 Aug 5, 2014 12:25 PM Flag

    what investors should concentrate is the worse case scenario. What happen if sprint tmobile deal falls apart? will sprint strive without tmobile? Here are a few important facts:
    If sprint lowers in service price point to be in line wit Tmobile, then revenue will drop by about 2 B a year.
    By this time next year, sprint's net debt will increase by 10B to 37B. Currently sprint pays 2 B in interest annually with average coupon rate about 8%. Sprint EBITDA without taking upfront recognition of equipment revenue is about 5.7 B this year. After this year, run rate for capex is about 5 B. So to pay for capex and interest expense, sprint needs to generate about 8.5 B from operation annually. Unless son can find ways to take out 3 B in cost and or increase revenue ( difficult in this competitive environment), a lot of investors will be disappointed. Tmobile will be similar situation. Here is a bright spot, if son cannot save sprint, then no one else can. I still believe in him but not as much as last year. After many years of mismanagement and underinvestment, sprint's problems are bigger than what everyone thought.

  • master_finance2003 by master_finance2003 Aug 3, 2014 11:23 AM Flag

    The most likely outcome is someone else will acquire tmobile instead of sprint. I agree with few posters here who mentioned sprint son have not forge ahead with the merger because regulatory risk is too high. But it does not hurt for sprint and son to pretend they are still interested in tmobile. This will support tmobile stock price and the eventual winner will have to take on big debt to take over tmobile. tmobile stock is supported by buyout rumors and Legere's business model is based on tmobile will be acquired therefore he hardly cares about tmobile's bottom line. Without the upfront recognition of equipment revenue, tmobile's EBITDA for the last 2 quarters are less than last year. They are attracting all those new customers at a loss. They have negative free cash flow for the last 2 years even though capital expenditure is a little more than 4 bil almost half of what sprint spends and less than a third of what att and verizon spend on their wireless segments. Sprint has similar free cash flow problem but it will be better next year when capital expenditure is not as high as result of completion of NV1. Also they have some opportunities to reduce their cost structures. The rural roaming alliance will significantly reduces roaming cost and extends sprint's footprint comparable to verizon's. Clearwire's expense will be completely off their book starting next year and joint purchase of handsets with softbank will take out a few hundred millions out their cost structure. But the biggest saving might come from interest expense if softbank can issue debts directly to sprint so they can retire those high coupon debts. Currently sprint pay 8 percent on their debts but softbank can borrow for less than 4. If you currently own sprint, then think long term. By this time next year, sprint's network will be awesome and their cost structure will be much better.

    Sentiment: Hold

  • Reply to

    Modeling the new company

    by cemetery_short May 31, 2014 12:25 PM
    master_finance2003 master_finance2003 May 31, 2014 2:48 PM Flag

    the combined company is still smaller than att and vz. att has enterprise value of 250B which includes att's wireline and video businesses. Its wireless business is valued at about 180B. Therefore it is not unreasonable that combined sprint and tmobile to have enterprise value of 150B. Since there is a 50% that the merger will pass regulatory approval, taking this probability into consideration, share should trade at about $15 before and 20 after gaining approval.

  • Reply to

    Modeling the new company

    by cemetery_short May 31, 2014 12:25 PM
    master_finance2003 master_finance2003 May 31, 2014 1:45 PM Flag

    I assume sprint will finance the purchase in cash only. 50B enterprise value for tmobile minus tmobile's net debt of 16B will give tmobile equity value of 34B. Which means sprint will need to borrown 34B to pay all of Tmobile's shareholders to take 100% control of company. So here you go, sprint will need to borrown 34B, add on top of that Tmobile's net debt 16B equal 50B of extra debt on sprint's balance sheet. Add this to sprint's current net debt will give you about 75B in net debt post transactions. So I was off by 5B.

  • Reply to

    Modeling the new company

    by cemetery_short May 31, 2014 12:25 PM
    master_finance2003 master_finance2003 May 31, 2014 12:52 PM Flag

    let's say transaction value tmobile at enterprise value of 50B, then the combined company enterprise value will be approximately 100B. Service revenue is about 48B. Assuming son can get 50% ebitda margin 24B, then the combined company should be worth 150B assuming enterprise multiple of 6. Subtracting net debt from this number will leave about 80B in equity value. Sprint 's market cap right now is about 40B. After transaction, share price should be about $20.

  • master_finance2003 by master_finance2003 May 31, 2014 10:54 AM Flag

    when the deal is announced, how much pop will we see in sprint share? my guess is 50 cents to $1.

  • master_finance2003 by master_finance2003 May 31, 2014 10:45 AM Flag

    I strongly believe that a deal will be announced in june or july. All the news that came out in the past few weeks were specifically designed to pop up sprint shares so that son can use the shares to pay for part of the price tag. It is highly unlikely that son will pay everything in cash and assume tmobile's debt. The resulting company will be handicapped by too much debt to compete effectively.

S
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