10 Updates

Sprint Faces Subscriber Growth Concerns Amid Intense Competition

Apr 29 2014, 8:03am CDT | by

Sprint is expected to announce its Q1 2014 results on April 29th. The third largest wireless carrier in the U.S. is facing intense competition for new subscribers, with rival T-Mobile stepping up...

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12 weeks ago

Sprint Faces Subscriber Growth Concerns Amid Intense Competition

Apr 29 2014, 8:03am CDT | by

Sprint is expected to announce its Q1 2014 results on April 29th. The third largest wireless carrier in the U.S. is facing intense competition for new subscribers, with rival T-Mobile stepping up its ‘Uncarrier’ promotions and AT&T responding aggressively with pricing discounts of its own last quarter. Sprint has also been lagging rivals Verizon and AT&T in LTE coverage, which is proving key to retaining and adding new subscribers in a saturated market. Last quarter, the carrier added only 58,000 postpaid subscribers – a sharp decline from the 400,000 added the previous year and much below T-Mobile’s 869,000 for the quarter. However, growing smartphone penetration and LTE usage should continue to help Sprint increase its data ARPU levels going forward. Like Verizon and AT&T, we expect Sprint to continue to see its margins improve on decreasing subsidy costs, helped along by the cost savings that the carrier is realizing from the shutdown of its iDEN network and ongoing Network Vision initiatives.

The carrier has seen its shares go through a very volatile period of late, on the back of rumors that it is lining up a potential acquisition bid for T-Mobile. While such a deal could help Sprint compete better with Verizon and AT&T, it faces regulatory issues as well as significant risks associated with integrating two huge complex networks (see Sprint’s Potential Bid For T-Mobile Could Make For A Risky Merger ). Sprint’s shares rallied almost 60% on the rumors in the last two months of 2013 but have since shed most of those gains this year. Our $8 price estimate for Sprint is about in line with the current market price.

See our complete analysis for Nokia stock here

Competitive Pressure From AT&T, T-Mobile

T-Mobile’s aggressive posturing last year, when it launched the iPhone on its network for the first time and introduced no-contract plans, saw the carrier perform impressively against its rivals. Last quarter, T-Mobile added 869,000 net postpaid subscribers, as compared to a loss of 515,000 in the prior year quarter. While T-Mobile’s subscriber gains have come at the expense of most rivals, Sprint seems to have been the most affected due to its lagging LTE coverage and Network Vision upgrades causing service disruptions in many markets. Last quarter, T-Mobile announced porting ratios which showed that it gained 3 subscribers for every 1 lost to Sprint – the most among the top three carriers. Sprint still managed to hold on to its market share last year due to the subscribers it added from deals with US Cellular and Clearwire. With AT&T entering the price war in earnest last quarter, Sprint’s subscriber concerns are likely to have exacerbated. It will be interesting to see the response that Sprint’s Framily plans, which were launched as an answer to rivals’ no-contract plans, have seen in the marketplace .

While subscriber defections are likely to be a concern in the near term due to Network Vision-related issues, Sprint expects these upgrades to be substantially complete by the mid-year. Its LTE coverage – also a concern over the last couple of years – is expected to reach 250 million PoPs by then and become less of a disadvantage as compared to rivals. With Sprint’s Spark plans expected to pick up speed after the Network Vision rollout, we expect the carrier to become a lot more competitive towards the end of 2014 and beyond.

Expensive Spark Program Worth It

Sprint’s Spark strategy will help it make use of Clearwire’s 2.5GHz spectrum to add data capacity and potentially push 4G speeds to more than five times what is currently prevalent in the industry. By catching up in LTE coverage and potentially leading the industry in data capacity and speeds, Sprint will finally have a compelling advantage over rivals to differentiate on service rather than pricing. This is important for the long-term ARPU growth of the company, which is currently limited by its overreliance on unlimited plans. With data demand surging, offering subscribers access to unlimited data could prevent Sprint from capitalizing on the future growth in data usage as LTE speeds become ubiquitous. By differentiating on data speed and capacity, Sprint could come up with innovative speed-based tiers at premium pricing to mitigate the long-term impact of its unlimited data plans. However, Sprint’s Spark rollout will be slow, with only 100 million PoPs (or about a third of the U.S. population) expected to be under coverage by the end of the year (see Sprint’s Spark Program Will Have Long-Term Benefits, Doesn’t Mitigate Near-Term Risks ).

However, the implementation of Spark will require significant capital expenses. Despite the fact that Network Vision is expected to be substantially completed by mid-2014, Sprint maintained its CapEx estimate at last year’s elevated level of $8 billion.

While the network modernization plan is proving to be expensive, it is also helping reduce operating expenses substantially by eliminating the duplicate fixed costs of maintaining different networks. It is allowing for better 3G/4G coverage and reducing roaming costs, as the spectrum previously used for iDEN is increasingly utilized for the CDMA/LTE network. Rolling out an LTE network is helping the Sprint improve its service gross margins as well, since it is a much more efficient network to manage than the existing 3G networks. Sprint’s wireless EBITDA margins in 2013 increased by 2 percentage points over the previous year. Also, going forward, we expect Sprint’s long-term capital expenses to decline substantially to their historical averages as TD-LTE deployment is completed and Sprint realizes the benefits of the higher data capacity of Clearwire’s spectrum.

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Update
10

6 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

Cambodia's Famous Battambang Circus
KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was told today. ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

6 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

New Zealand All Blacks Squad Announcement
KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

6 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

Federal Aviation Administration Bans All US Flights To Israel
KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan R ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

6 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammuddin H ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

INDIA-CHINA-DIPLOMACY-TRADE
PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the sou ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

Government Weekly Cabinet Meeting
KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Ser ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

Iskandar Johor Open - Previews
JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allocation o ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

EurAsia Cup presented by DRB-HICOM - Day One
PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Dam ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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