Sprint Sees Growth Ahead and Vows to Get Aggressive on Debt
Ockham Research submits:
Sprint Nextel (S) is getting a boost today after announcing that it will continue strict cost management in an effort to aggressively pay down debt. During a discussion with analysts, Sprint’s CFO Bob Brust reiterated their goals to reduce the debt burden which has slowly declined since the Nextel acquisition, too slowly for many investors. Sprint has seen improving trends as far as customer retention or churn rate in the last few quarters, but it is still a huge hurdle as more than half a million post-paid wireless clients defected to competitors in the fourth quarter. Perhaps most importantly though, Brust expects to see revenue growth in the coming quarters; it would be the first growth since fiscal 2006.
Obviously, when Sprint acquired Nextel they took on debt to finance the transaction, but they expected better growth and cost savings as a result of the transaction. Instead, the company has dealt with declining sales almost as soon as the $35 billion transaction closed. In hindsight, the so-called “merger of equals” has lead to plenty of headaches for the combined company and on Friday Sprint’s credit rating was chopped yet again by S&P to BB-. The credit rating agency pointed to continued churn in their precious post-paid wireless clients (504,000 post-paid subscribers lost in Q4), which is more profitable than the prepaid wireless service, which is at least growing.
Investing, Long Term Investment, stock market | admin March 8, 2010
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