Ina Fried

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Sprint Shares Fall as Company Inks Deal With LightSquared, Loss Widens

Sprint on Thursday announced a long-anticipated pact with aspiring 4G wholesale network provider LightSquared, and said it gained more than a million customers last quarter, though its loss for the period widened from a year ago.

The company said it lost $847 million, or 28 cents per share, on revenue of $8.3 billion for the three months ended June 30. That compared to a net loss of $760 million, or 25 cents per share, on revenue of $8 billion in the year-ago quarter.

Shares of Sprint were trading lower in premarket trading, changing hands recently at $4.53, down 63 cents or more than 12 percent.

On the customer side, much of Sprint’s gains were via wholesale and prepaid customers, with the company reporting a loss of about 101,000 net postpaid subscribers during the quarter. Though still losing postpaid customers, Sprint cut the rate by more than half from what it was posted in the second quarter of 2010. The company said its postpaid churn rate for the quarter was a best-ever 1.75 percent, smaller than the 1.85 percent from a year ago, and 1.81 percent in the first quarter of this year. The lower churn came as nine percent of Sprint’s core postpaid customers upgraded their phones during the quarter.

The company reaffirmed its full-year forecast issued in April, saying it expects to add postpaid subscribers for the full year and to add more wireless customers overall this year than it added last year. Capital expenses excluding interest should be about $3 billion, and the company said it expects positive cash flow for the second through fourth quarters and for 2011 as a whole.

As for the LightSquared deal, it’s a 15-year agreement that has each making a number of commitments and giving Sprint additional options when it comes to offering high-speed wireless services to customers. LightSquared will pay Sprint about $9 billion in cash for providing 3G roaming, spectrum hosting and network services, and will give Sprint $4.5 billion in credit for use on LightSquared’s forthcoming satellite and LTE networks.

Sprint has the option of using up to 50 percent of LightSquared’s expected 4G capacity in the so-called “L band.”

With the agreement, LightSquared said it expects to have its first 4G LTE services available in the second half of 2012. Sprint said it will talk more about its 4G plans at an Oct. 7 investor day event.

Dan Hays, a partner at management consulting firm PRTM, said the deal should benefit both companies, as LightSquared can host its 4G network within Sprint’s next-generation cell sites.

“For Sprint, this will defray a significant portion of its planned capital investment and deliver increased cash flow while providing an opportunity to tap into LightSquared’s competitive 4G technology,” Hays said in a statement. “For LightSquared, this deal will dramatically reduce the cost and time required to deploy its nationwide, mobile broadband network to hundreds of millions of Americans.”

Hays also said the 3G roaming piece of the deal should help LightSquared, as it allows the company to offer partners nationwide service from the outset.

LightSquared still faces significant financial and regulatory challenges in building its network, including concerns that it poses interference with GPS systems. LightSquared has said it has a plan that should significantly reduce such interference.


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