Sprint Looks To Investors for $500 Million

Posted by Kallan Dahn Tuesday, August 11, 2009

Sprint/Nextel has filed a motion with the Securities and Exchange Commission in an attempt to raise $500 Million from investors. The raised capitol is expected to be put into general operational expenses, network enhancements, etc. Sprint has been taking many steps recently to make sure it is getting a more stable financial footing, and this is an extension of that. Earlier this year Sprint outsourced the operation of their network to a third-party company to free up capitol and create a situation where Sprints assets become more liquid. Liquidity of the assets will allow Sprint to be more financially agile. Sprints ability to quickly react to extreme changes in the market condition in this downed economy will be key to Sprint regaining their market share.

Last quarter Sprint was the only major carrier post a net loss in subscriber numbers. The low churn rates, coupled with the high number of subscriber additions of competitors will make Sprints direction a hard fought battle. While sales of the Palm Pre have been record breaking for the company, the device does not have the type of subscriber sway that we have seen from other devices such as the iPhone. Verizon's announcement to carry the Pre in early 2010 most certainly has hampered the effects of the handset release. Sprints current focus looks to be on their prepaid product offerings. Boost mobile has been very successful with the marketing of their no-contract unlimited package for only $50 / month. Sprint recently announced a purchase of the prepaid operator Virgin Mobile for $500 Million. The per subscriber revenue associated with prepaid accounts is much lower that then typical post-paid subscriber. The economic effect of the prepaid offerings however, may be just what the Dr. ordered to get the company back on track. No termination fees to bound customers into the plan will require Sprint to step up their game, and fix their long plague customer service issues to keep subscribers. The tricks they learn in the prepaid market will translate easily to post paid subscribers. I would keep my eye open for next year. Sprint will most likely create a contract package that is more in line with their prepaid offerings, and a program to transition prepaid customers with good on-time payment records into post paid subscribers. Sprint is shaping up better and better every time they shift their focus. Look for Sprint to be rising back into profitability by this time next year.

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