Sprint's trick to making money: A year of free of service

CORPORATE REPORT: Charter, Sprint and HSBC
Sprint Corp (S) Stock Shoots Higher With a Brighter Future

01 August, 2017

Sprint, the nation's fourth largest carrier, has ended the quarter with a profit for the first time in three years.

Sprint said it cut its cost of services and selling, general and administrative expenses by about $370 million in the quarter and that it expects an additional $1.3 billion to $1.5 billion of year-over-year reductions in fiscal 2017.

On the M&A front, Sprint (s) has been reportedly in talks with competitor T-Mobile (tmus) as well as the two cable giants getting into wireless, Comcast (cmcsa) and Charter Communications (chtr). The new announcement now means Sprint can resume its merger negotiations with rival telecommunications company T-Mobile.

In its latest quarter, Sprint added 88,000 customers that pay a monthly bill, its most lucrative customers, versus 173,000 the year before.

"Sprint reached an important milestone this quarter by returning to profitability for the first time in three years".

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Revenues were $8.2 billion in the quarter.

Debt-heavy Sprint has been trying to turn its business around, and CEO Marcelo Claure said on a call with analysts Tuesday that it could "sustain itself" alone.

Sprint added 61,000 total users in the quarter. Claure said that "we think in the near future, we should be able to strike a deal with one of the different players". Regulators lifted a ban on merger discussions among telecom companies following the conclusion of an auction of broadcaster airwaves for wireless use in April. Claure said he was "a bit surprised" to see that announcement and that Charter talks were part of a "bigger play".

Revenue rose about 2 percent to $8.16 billion, missing the $8.19 billion analysts expected, according to Zacks. After rallying more than 130% in 2016 in anticipation of a corporate turnaround, as of Monday afternoon Sprint stock was down just a bit year-to-date largely because evidence of that turnaround remained obscured. "And that deal is going to benefit most of Sprint shareholders". SoftBank has achieved sizable girth through highly leveraged financing of acquisitions like Alibaba Group Holding Ltd., for which it has achieved outsized returns, and Sprint, on which it has lost billions. The CEO, however, repeatedly said that Sprint has a lot of potential options.

Sprint's shares are up at $8.45 - a 5.89% climb - in morning trading Tuesday. Verizon's launch of an unlimited data plan hurt Sprint's subscriber numbers during the quarter, Claure conceded, but Sprint added 115,000 new customers in July as the market calmed.

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