Sprint Surprises with Profit, Says a Deal May Be Coming Soon

Aug 01, 2017, 22:50
Sprint Surprises with Profit, Says a Deal May Be Coming Soon

(S) - Charter, one of the largest cable companies in the U.S., says it's not interested in buying Sprint, the fourth-largest wireless carrier in the U.S. Sprint, which is unprofitable and has a lot of debt, had proposed an acquisition by Charter, according to published reports. "The company delivered almost $370 million of combined year-over-year reductions in cost of services and SG&A expenses in the quarter, bringing the total reduction during the last nine quarters to almost $4 billion".

The deal would merge Sprint's wireless reseller capability, known as MVNO, or "mobile virtual wireless operator", with Charter, the second-largest USA cable company. The company has been exploring deal options with T-Mobile US Inc but faces the hurdle of reaching an agreement on price as well as getting the deal approved by regulators.

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The Overland Park, Kansas, provider lost a total 39,000 net postpaid customers, or people who pay at the end of the month and are generally considered more valuable customers. Operating revenues hit $8.2 billion year-over-year, marking four consecutive quarters of growth in that metric. Claure said that "we think in the near future, we should be able to strike a deal with one of the different players".

Sprint also scored 35,000 new pre-paid additions, up from a loss of 306,000 in the same period previous year, but less than the 291,000 prepaid additions in the preceding quarter.

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"Regardless though, we believe at current levels there is limited downside risk as a result of potential Sprint oriented M&A", the firm said. That's likely due to the loss of tablet customers, as the company added 88,000 net new phone customers. And while Charter recently said it "has no interest in acquiring Sprint", Claure said that offer was never on the table-perhaps leaving the door open for some other kind of arrangement with the cable operator. But striking a deal with a deep-pocketed partner has become much more hard over the last two years as Sprint has seen its stock rise.

Charter shares closed Monday at $391.91, up $21.65, or 5.9 percent.

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Craig Moffett, a telecom analyst at MoffettNathanson, worries investors may sour on Sprint if a deal doesn't materialize amid all the talk. Not only did the company dish out another progressive quarter, the pace of that progress seems to be accelerating, inspiring more than a 2% improvement in the value of Sprint stock early Tuesday.

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