Archive for the ‘Sprint: No Light at the End of a Tunnel’ Category

Sprint: No Light at the End of a Tunnel

November 7, 2008

Sprint reported earnings earnings today and it’s a pretty ugly picture once again. While AT&T and Verizon Wireless both added millions of customers, the struggling No. 3 U.S. wireless carrier lost 1.3 million subscribers–several hundred thousand more than analysts were expecting.

The company reported a third-quarter loss of $326 million and a 12% drop in revenue. Sprint stock is down 13% to about $3.15 on the news.

And, as I predicted, Sprint was forced to deal with its declining credit quality. The company restructured its $6 billion credit facility, allowing its EBIDTA to debt ratio to rise to 4.24 from 3.5. That will help it avoid going into default. However, it paid a steep price. The facility shrunk to $4.5 billion. And its interest rate on the credit line jumped from LIBOR + .75% to LIBOR + 2.5% to 3.0%. That’s about $20 million in additional annual interest fees, estimates Sanford Bernstein analyst Craig Moffett.

One bit of slightly positive news: “Customer care metrics have improved steadily throughout the year, and external surveys are confirming we’re providing a better customer experience,” said CEO Dan Hesse. But the company still needs to cut its churn rate in half in order to reach ZERO subscriber losses. The other big challenge: creating new more products that will attract new customers.