Sprint-AH-00130

Analysts Believe Sprint’s Latest Announcement is “Risky”

April 7, 2016 - Written By Alexander Maxham

Yesterday, Sprint formally announced that they were going to use their network as collateral for borrowing about $2.2 billion from “external investors”. There had been rumors floating around for a few months that the company might be doing this, and now it’s official. Which means industry analysts are now putting out their two-sense about this move by the country’s fourth largest wireless carrier. Sprint has been in a bad place. Mostly since acquiring Nextel in the early 2000s, which many called the worst acquisition in history. It was so bad that the low band spectrum Sprint wanted from Nextel (800MHz), they couldn’t actually use for almost a decade. Now that Sprint is owned by SoftBank, and has been burning through SoftBank’s cash rather fast, they are looking for other ways to bring in money and continue their turn around.

Analysts are now thinking that this move to use their network gear as collateral could build a “risky financial future” for the carrier. Sprint is in need of cash. They have a number of loans that are coming due this year and in the next. So now they are looking to get a few billion to pay those loans off. But that doesn’t help their current position, financially. It’s sort of like “robbing peter to pay paul” as the old saying goes. An analyst from Wells Faro, Jennifer Fritzsche stated in a research note that they “expect more tranches to be announced which would bring the total capital infusion from this initiative to be in the $3B to $5B range.” She also noted that Sprint disclosed in their announcement yesterday that “the assets included in the first sale lease-back were primarily existing equipment located on towers.”

Estimates have put Sprint’s spectrum portfolio at around $115 billion. Which is giving the carrier all kinds of wiggle room when it comes to getting loans and such. There is a number of spectrum which they aren’t using right now and could lease out to other carriers in exchange for cash. Even though SoftBank CEO, Masayoshi Son, said that they would not be doing that anytime soon. You see, spectrum is the most important asset a carrier can have. Without enough spectrum, their network will suffer. As we’ve seen with T-Mobile up until recently. Spectrum is basically the equivalent to gold for wireless carriers.