Sprint’s reveal of its second fiscal quarter financial results on Tuesday yielded few surprises in the wake of the company’s teaser of subscriber metrics last week, but painted a mixed picture of the carrier’s position.
Sprint said it has already taken out more than $1.1 billion in costs out of its business and has improved its liquidity position to more than $11 billion in total liquidity.
But much of the company’s other good news, it seems, was balanced by less impressive figures.
While wireless net operating revenues increased five percent to $7.85 billion in the period, wireless service revenue of $6.0 billion was down from $6.1 billion the previous quarter and $6.3 billion the year prior.
Wells Fargo Senior Analyst Jennifer Fritzsche admitted the firm had been hoping Sprint could show an increase in the latter figure, but said it was still “encouraged” by a lessening in the sequential decline. Still, as BTIG’s Walter Piecyk showed on Twitter, Sprint was at the bottom of the pack in terms of wireless service revenue growth – falling well behind the struggling AT&T and Verizon.
Similarly, while Sprint reported 347,000 postpaid phone net additions, it also recorded prepaid net losses of 427,000.
Though Sprint touted its postpaid figure as a sign of growth, MoffettNathanson’s Craig Moffett on Tuesday pointed out the industry has increasingly been moving to treat pre- and postpaid collectively as overall branded growth rather than as separate and unequal indicators. And by the former measure, Sprint was at the bottom of the pack instead of near the top.
Sprint’s postpaid net phone additions alone would have put it behind T-Mobile and well ahead of both Verizon and AT&T for the quarter. But in a holistic view of pre- and postpaid, Sprint’s net loss of 80,000 subscribers put it all the way at number four behind AT&T’s loss of 36,000, Verizon’s gain of 47,000 branded phone subs and T-Mobile’s whopping 1.5 million total branded phone additions in the period, Moffett’s analysis showed.
Moffett also slammed Sprint’s continued anemic capital spending figures.
“Does anyone really believe that Sprint’s past six months trend – 5.9% of revenues, or $3.97 per subscriber per month, in Q2 and now 5.7% of revenues or $3.99 per subscriber per month in Q3 – is remotely conducive to a network-led recovery?” he wrote. “All of Sprint’s free cash flow improvement has come from reduced capital spending.”
Moffett’s doubts were echoed loudly in the market, which sent Sprint shares crashing 6.7 percent on Tuesday after the carrier’s financial report.
Despite the negatives, though, Moffett argued Sprint does have an opening to compete with AT&T in particular as its merger with Time Warner strains its balance sheet and limits its ability to invest in its network. But Moffett said in order to take advantage and secure a true rather than superficial turnaround of its metrics, Sprint will have to put its money where its mouth is and invest in itself.
