Can Sprint Turn Things Around Quickly Enough?

Sprint (NYSE:S) recently announced that it has received approval from its majority shareholder SoftBank for its new network modernization plan. ^[1] The plan, which will involve improving the carrier’s coverage and network speed, will likely require billions in capital expenditures as well as potential spectrum purchases. Sprint CEO Marcelo Claure believes the company’s network performance will match or exceed rivals Verizon (NYSE:VZ) and AT&T (NASDAQ:T) within two years. However, the costly plan will put an even greater strain on the company’s financial position. Furthermore, it will become even more vital if the rumored merger between Dish Network (NASDAQ:DISH) and T-Mobile comes to fruition, as that would create a stronger third rival for Sprint. Despite these risks, we believe that Sprint will still be able to turn things around. Here’s why:

• Sprint still has an abundance of spectrum assets. While its higher-band spectrum is less valuable than the lower-band spectrum many of its rivals have, the company will still be able to utilize it to upgrade its network or – if conditions worsen – sell a portion in order to fund further upgrades.
• Sprint’s innovative plan offerings have helped the company stem its postpaid subscriber losses and led to overall subscriber growth. While those have come with a cost – including upfront switching and subsidy costs, as well as reduced ARPU due to lower rates and unlimited data plans – the first and most important step in a turnaround is stopping subscriber losses.
• The company also has a backer with deep pockets in Softbank. The Japanese telco has invested heavily in Sprint, and will likely continue help to fund a turnaround, whether it is for Sprint on its own or with another partner – such as Comcast, or even T-Mobile or Dish if their rumored merger doesn’t come to fruition.

See the links below for more information and analysis:

• Limited Options For Sprint If T-Mobile Merges With Dish Network
• Merger With T-Mobile The Right Step, But Dish Needs To Speed Things Along
• Trefis analysis: Sprint’s U.S. Postpaid Wireless Market Share
• Trefis analysis: Sprint’s Mobile SG&A Costs
• Sprint Secures Plan to Modernize Its Network. But at What Cost? (Re/Code)
• Analyst: Sprint selling some of its 2.5 GHz spectrum won’t be its financial salvation (Fierce Wireless)

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1. Sprint Secures Plan to Modernize Its Network. But at What Cost?, Re/Code, June 2015 [↩]