Can Sprint’s Recent Margin Expansion Continue?
Sprint (NYSE:S), the fourth largest U.S. wireless carrier, saw its fiscal Q1 EBITDA margins rise by about 470 bps year-over-year to about 30.7% recently, despite posting a slight decline in operating revenues. While some of the growth comes from increasing uptake for the carrier’s handset leasing program, which sees costs recognized under the depreciation header (not captured under EBITDA), Sprint has also been cutting down on its network and SG&A expenses (down by about 12% each). It’s likely that Sprint’s margins will continue to expand going forward, as its revenue base increases amid recent postpaid subscriber growth and also as it looks to achieve a sustainable reduction of $2 billion or more in run-rate operating expenses exiting fiscal 2016. Below we break down the key components of Sprint’s year-over-year EBITDA growth.
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