Analysts Share Concerns Over Sprint's Q2 Results

Sprint may have once been a fast-rising wireless carrier in the U.S., but it has since been toppled by T-Mobile as the largest competitor to the 'big two', AT&T and Verizon. It was just last year that Sprint lost its pride of place as the third-largest carrier in the country to an aggressive T-Mobile, led by its irrepressible and outspoken CEO, John Legere. With the carrier losing significant market share to its Deutsche Telekom-owned rival in recent times, most analysts have been negative about the prospects of a quick turnaround for the Kansas-based company. The carrier, however, sprung a bit of a surprise at its Q2 earnings call earlier this week, when it announced 173,000 net postpaid subscriber adds in the three months from April to June.

While that in itself is impressive, another little figure would have felt just as sweet for the company’s shareholders, including Softbank CEO, Masayoshi Son. According to the Q2, 2016 report released by Sprint, its postpaid churn fell to an all-time low of just 1.39%, making it the sixth successive quarter when the carrier improved its postpaid subscriber churn on a YoY basis. Wall Street reacted positively to the news and the company’s stock rallied to reach $5.91 at the NYSE last Monday. The stock has, since then, climbed even further and was trading at $6.10 recently. That’s a significant increase in just a week, seeing as it was languishing at $4.62 on July 22.

However, even as some investors seem to be happy about the carrier’s apparent road to recovery, some analysts continue to remain skeptical. For their part, they’ve been pointing out that in spite of doing significantly better in terms of subscriber numbers, the carrier still lost $302 million during the quarter. According to Walter Piecyk of BTIG Research, the 12% growth in gross postpaid subscriber adds and the 1.39% postpaid subscriber churn may be positive signals for Sprint going forward, but they do not mean the company is off the hook just as yet. While the performance was “commendable”, it was still “not enough to grow revenue, which was in-line with our estimate”, as per his observations.

Earlier this week, equity research firm, MoffettNathanson, published a research note expressing much the same concerns, pointing at the 331,000 customers that Sprint’s prepaid business lost during the quarter and the 6.8% lower ARPU from its postpaid customers during the period. According to the research report, “Sprint's margins, even after adjusting for the accounting distortions of its handset leasing plans, have improved (but only a little, and not remotely as much as they initially appear on an as-reported basis). Notwithstanding that, yes, things are getting better, whether there would be anything there for equity holders, and even whether creditors would be made whole, remains unclear”.

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About the Author

Kishalaya Kundu

Senior Staff Writer
I've always been a tech buff and have been building my own PCs since as far back as I can remember. My first computer was a home-built desktop running MS-DOS on which I learnt to program in GW-BASIC and my interests apart from technology include automobiles and sports.