Sprint-AH-00118

SoftBank Stock drops 18%, Sprint’s Stock at a 2-Yr Low

January 21, 2016 - Written By Alexander Maxham

It’s no secret that Sprint has been having issues with their network, their customers and their revenue for the past few years. Actually it dates back much longer than just a few years. This led to SoftBank purchasing a controlling stake in the company back in 2012. After attempting a merger with T-Mobile, which the FCC were having no part of, SoftBank then decided to clean house in Sprint. Getting rid of Dan Hesse and replacing him with Marcelo Claure as CEO of the company in 2014. Under Claure’s leadership, Sprint has seen a lot of changes. Gone is Sprint Spark, instead we have LTE Plus. Prices dropped dramatically, customers started coming back, and the network is getting better. Although it still has a long way to go. In the midst of all of that, Sprint is burning through cash at a record pace. And this has investors worried.

SoftBank’s CEO and Sprint Chairman, Masayoshi Son has already lost $3.2 billion since buying Sprint. In that’s in addition to the $20 billion he paid for the controlling stake in the company. Now SoftBank’s stock has decreased 18 percent over the last four days. Signaling that Sprint’s struggles are going to continue. On top of that Sprint’s stock is at a two-year low. Last week, Sprint announced that they were making some changes to their towers, and moving their hardware on over to government-owned towers, which will be significantly cheaper. Along with ceasing to use AT&T and Verizon’s Fiber Optic cables which cost the company $1 billion per year that goes to their competitors. Analysts haven’t been too keen on this being a good measure for the company to save money, and it appears that the investors agree.

Additionally, SoftBank has taken on around $100 billion in debt from Sprint. That’s five times what it paid for the company. The reason SoftBank opted to buy Sprint was to turn SoftBank into a worldwide carrier, similar to Deutsche Telekom and Vodafone. But it appears that Sprint may not be the answer there. It’s likely that SoftBank may revisit a T-Mobile acquisition once the new FCC and DOJ is in power (after President Obama steps out of the White House next January). But there’s no assurance that will happen, nor that it will save Sprint.