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SoftBank Steps In To Save A Cash-Strapped Sprint

August 5, 2015 - Written By Joshua Polite

Sprint and its CEO Marcelo Claure had a somewhat rough year. From admitting that eventually they probably will have to get rid of unlimited data to a very public Twitter fight with rival CEO T-Mobile’s John Legere, it’s been a trying year. This latest piece of news that has just dropped on investors is most likely not going to help. It seems that while Sprint has been trying its hardest to hold off being passed by T-Mobile all the while still trying to catch up to Verizon and AT&T, Sprint has started to run out of money. Sprint spent $2.2 billion in just the second quarter trying to keep up with its rivals alone. Add to the fact that the new trend in the industry is to have people pay monthly fees on new equipment. This means Sprint has to pay for all those phones and tablets upfront from suppliers. They then have to wait for the payments that are not always on time. That’s not a good practice for a cash-strapped wireless carrier running out of money.

Investors were getting so nervous with Sprints current state that SoftBank Chief Executive Officer, Masayoshi Son, had to put all fears to bed this week. Masayoshi Son told investors that there was no need to worry and that Softbank is not going to sell its shares in Sprint. On that same conference call to investors Son also had this to say; “SoftBank will be the minority, partner. And we will provide together with our partner, as much as Sprint needs for the handset. Similarly, we are preparing a network equipment lease facility.” In response to fears that Sprint would have to sell off some of its wireless airwaves among others things to raise funds, CEO Marcelo Claure had this to say to calm nerves, “all we’re doing is a way to neutralize the cash position, so this is not about raising additional debt.”

Despite all these assurances by Sprint CEO Marcelo Claure and SoftBank Chief Executive Officer Masayoshi Son that Sprint was still on firm standing, analyst and investors don’t seem entirely convinced. Analyst Walt Piecyk had this to say; “New financing does not change the fact that these are incremental obligations that are going to pile additional liabilities on top the company.” While S&P Capital IQ analyst Angelo Zino had this thought about Sprint CEO Marcelo Claure; “(Marcelo) has made the numbers look less bad. This is going to be a long and slow transition.” Softbank might have saved Sprint this time, but one has to wonder how much longer will they have the cash or the want to save them. Only time will tell.