Sprint Corporation (S): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report
Summary:
Sprint's efforts to deliver substantial long-term margin improvement by expanding its Long Term Evolution (LTE) coverage, modernizing network infrastructure as well as the successful merger with SoftBank resulted in significant cash flow and improved liquidity. Further, the company's focus on subscriber and revenue growth in the core Sprint platform through the deployment of its multi-billion dollar restructuring program Network Vision is enhancing wireless growth prospects. However, increasing churn rate, high spending and decline in postpaid customer base are major near-term negatives for the company. Also, aggressive pricing competition is compelling the company to invest in higher promotional activities which may deteriorate its cash position. Therefore, we downgrade our recommendation on Sprint from Neutral to Underperform.
Overview:
Based in Overland Park, Kansas, Sprint Corporation (formerly known as Sprint Nextel Corp.) is the third largest wireless communications company in the United States based on the number of wireless subscribers, one of the largest providers of wireline long-distance services and also the largest carrier in terms of Internet traffic in the nation. The company offers a comprehensive range of wireless and wireline communications products and services for individual consumers, businesses, government subscribers and resellers. On Jul 10, 2013, Sprint reported successful completion of its acquisition by Japanese cellphone company Softbank Corp. The company is now listed as Sprint Corporation and continues to trade with ticker symbol "S".
Sprint offers wireless and wireline voice and data transmission services to subscribers in all 50 states, Puerto Rico and the U.S. Virgin Islands under Sprint, Boost Mobile, Virgin Mobile, Assurance Wireless and Common Cents using code division multiple access (CDMA), integrated digital enhanced network (iDEN) and internet protocol (IP) technologies. The company also offers fourth generation (4G) services utilizing the Worldwide Interoperability for Microwave Access (WiMAX) technology through mobile virtual network operator (MVNO) wholesale relationship with Clearwire Corporation and its subsidiary Clearwire Communications LLC (together "Clearwire"). Sprint currently owns an approximately 50% stake in Clearwire and utilizes the network to offer wireless and wireline subscribers differentiated products and services through the use of a single network or a combination of these networks.
To strengthen its presence in the fast-growing prepaid market, Sprint acquired Virgin Mobile USA in Nov 2009 for $483 million. Moreover, the company acquired its wireless affiliate iPCS Inc in late 2009, which has expanded its service territories while offering meaningful cost synergies. Sprint completed its Clearwire acquisition in Jul 2013. The acquisition gave Sprint full rights over Clearwire including access to its radio frequency spectrum ranging 2.5 GHz, utilized in providing services using 4G 802.16e mobile WiMAX standards.
Sprint operates through two principal business segments: Wireless (approximately 92% of revenues in 2013), and Wireline (8% of 2013 revenues). Sprint offers wireless services on a post-paid and prepaid payment basis to both retail and wholesale customers.
Wireless: Sprint's Wireless segment has licenses to provide wireless service in the U.S., Puerto Rico and the U.S. Virgin Islands. The division provides wireless voice and data services using CDMA and iDEN technology based networks as well as offers 4G wireless services. In addition to its direct customer base, the wireless unit provides wireless service through its wholesale partners (including Virgin Mobile) and affiliates. Sprint's wireless data communications services offers an array of services including Internet access and messaging, email, mobile video and entertainment applications. Wireless voice communications services include local and long-distance voice services, voicemail and value-added services such as call waiting, caller identification, directory assistance, call forwarding, push-to-talk services and roaming.
Wireline: The Wireline segment provides wireline voice and data communications services, including domestic and international data communications using various protocols such as Internet protocol (IP) and Voice-over-IP (VoIP). It also offers traditional voice services and wide-area network and long-distance services.
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