Sprint Needs More Cash to Survive

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Sprint recently announced that it would cut about 10% of its operating costs, saving $2 billion, part of which would be used for network build out. Chris Nolter of TheStreet reported that CEO Marcelo Claure said this will allow Sprint to revive operations without taking on more debt, selling equity or auctioning its wireless spectrum. The lack of cash is why Moody’s Investors Service cut Sprint’s credit rating in mid-September from B1 to B3.  “We’re very skeptical about their ability to stabilize their operations and turn around their performance,” said Moody’s analyst Dennis Saputo (TheStreet).

Nolter also mentioned that while this administration has been in favor of four wireless carriers, there’s a chance that a Republican candidate will be more in favor of consolidation. That would greatly help Sprint in the long run. The company dropped consolidation plans with T-Mobile last year after regulators made it clear they would not approve a merger. “A Trump administration, or that of another Republican, might look more favorably on consolidation, especially if Sprint deteriorates and has questionable viability as an independent carrier,” Nolter wrote.

Even with cuts, Sprint will rely heavily on Softbank’s financial commitment moving forward. “At the end of June, Sprint had about $2.3 billion in cash,” Nolter explained. “The company could tap another $2.9 billion or so from its revolving credit facility. Sprint has an additional $1.4 billion available from its financing agreement backed by receivables and $1.3 billion in vendor financing. The telecom has $34 billion in debt.”

October 13, 2015 |
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