Sprint’s Earnings Will Be Eagerly Watched For Softbank Merger Updates

by Trefis Team
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Sprint (NYSE:S) plans to announce its Q4 2012 earnings on February 7. We will be closely watching the company’s net postpaid subscriber additions for the quarter as well as the postpaid churn numbers to see if the management is continuing on its strong iPhone performance so far. The iPhone’s first few quarters at Sprint have been good with the smartphone helping to add a good number of new subscribers to its core Sprint network despite an industry-wide saturation in wireless growth. Sprint started offering the iPhone on its network at the start of the fourth quarter last year becoming the third carrier in the U.S. to offer the device after AT&T (NYSE:T) and Verizon (NYSE:VZ).

We feel that investors and the market are extremely anxious to hear from the management on the progress of Sprint-Softbank merger in light of recent events. (see  Three Ways The Sprint-Softbank Saga Could Play Out) We are also watching for updates on the Clearwire (NASDAQ: CLWR) acquisition bid and if Sprint has any contingency plans to deal with potential loss of Clearwire.

See our complete analysis for Sprint

Sprint-Softbank Merger

In a letter to the Federal Communications Commission (FCC), the U.S. Department of Justice (DOJ) has asked the commission to hold off its review for the Sprint-Softbank merger. The merger is being investigated by the DOJ, the Federal Bureau of Investigation (FBI) and the Department of Homeland Security (DHS), for any potential impact on national security, public safety or law enforcement. As the matter is still under investigation, the commission has been asked not to review the merger until the investigation is complete. We hope to hear from the management on an update to the timeline by when this review would be complete.

In October 2012, Sprint announced a 70% stake sale of the company to Japanese telco Softbank. The complex $20 billion agreement allows Softbank to purchase 55% of Sprint at $7.30 per share, and infuse a total of $8 billion in cash at $5.25 per share in two separate transactions. Sprint has already received $3.1 billion in convertible debt as part of the deal and the rest of the cash transaction is to be done after the regulatory approval. The capital infusion was supposed to help Sprint close the Clearwire acquisition and put the rest towards improving its network, but the recent developments seem to have roadblocked the company’s growth plans.

LTE Update

With Verizon and AT&T far ahead in the LTE race, we expect an update on Sprint’s LTE plans. Sprint has only just launched its LTE network and has it live in 19 cities in the U.S. While that is a small number compared to Verizon and AT&T, we expect Sprint’s accelerated LTE deployment schedule to help it catch up with the two by the end of 2013.

We also expect to see Sprint’s unlimited plans being as valuable to subscribers this year as they were earlier, if not more. While competitors AT&T and Verizon stopped offering unlimited plans to new subscribers last year and have recently moved on to tiered data share plans, Sprint has steadfastly remained committed to the same, even for LTE. Since the higher-speed 4G LTE network will cause subscribers to easily overshoot their tiered data plans, we see subscribers attaching more value to unlimited plans, as LTE becomes mainstream. This should help Sprint rope in enough iPhone buyers going forward despite its near term LTE disadvantage. (see Sprint Woos iPhone 5 Buyers With Unlimited Plans Despite LTE Disadvantage)

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