The third largest wireless carrier,
Sprint Nextel Corp.
), announced that the termination of iDEN networks would be over by
June 30 next year. This would aid the company in concentrating on
the core Sprint platform, which includes CDMA, WiMAX, Long-Term
Evolution (LTE) and other network technologies.
The elimination of the Nextel platform is the part of the
Network Vision plan, which is progressing well. Sprint intends to
decommission 30,000 cell sites to 38,000 from the existing 68,000,
of which 9,600 cell sites will be shut down by the end of the third
quarter this year and the remaining in the next year. The company
has already terminated about 1,300 cell sites as of March 2012.
Over the past few years, Sprint has been struggling to integrate
its CDMA mobile network with Nextel's iDEN wireless network
(acquired in 2005), resulting in subscribers losses to other
). Management believes the termination of Nextel platform will
provide immediate savings from utilities and maintenance, and
additional savings from tower rent going forward.
At the same time, Sprint raised $1 billion of credit facility to
purchase network equipment from
). The credit agreement will expire in March 2017. This financing
is in addition to the $2 billion raised in March this year and $4
billion raised in the fourth quarter last year.
Sprint is taking advantage of the falling interest rates in the
capital market as it is in the midst of a multibillion dollar
network upgrade. Though the company has enough liquidity, it is
raising funds to address the growing costs of network upgrade,
iPhone subsidies, debt maturities and working capital
Sprint expects to spend $4-$5 billion in upgrading its network
and building LTE in collaboration over two to three years, thereby
minimizing its free cash flow. The company also promised to pay
$15.5 billion to
) over the next four years. As a result, the company has to pay 40%
more subsidies than other smartphones that would equate to more
than $200 per device.
Further, Sprint needs fund to repay its debt, which is due in
March 2013 with $300 million, followed by $1.5 billion in October
We are maintaining our long-term Neutral recommendation on
Sprint. For the short term (1-3 months), the stock retains a Zacks
#3 (Hold) Rank.
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