Will Sprint Corp (NYSE:S) Survive without the T-Mobile Merger?

November 06, 2017, 10:36 am ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Sprint Corp (NYSE:S) and T-Mobile USA announced on Saturday that they were calling off merger talks that would have combined the third largest and fourth largest US carriers. Many analysts speculated that this would compound Sprint’s current problems given the massive debt that the carrier is currently servicing.

Article Summary

Sprint and T-Mobile cancelled their merger talks on Saturday.

The company announced a new deal with Altice USA Inc.

The company faces an uphill task in efforts to return to profitability.

Here’s the trading report on Sprint.

SoftBank, which is the largest shareholder in Sprint, said that it would increase its investment in Sprint in order to support the company even as it completes its restructuring plan. SoftBank currently owns about 83% of Sprint shares, which is extremely close to the 85% threshold that could lead to the carrier being delisted.

Having closed the door on negotiations with T-Mobile, Sprint announced a new deal with Altice USA Inc (NYSE:ATUS), a cable and broadband services provider. Under the new deal, Altice will offer its customers wireless services using Sprint’s network and Sprint will have access to Altice’s network as part of its diversification efforts.

Sprint currently ranks among the top worst performing tech stocks in the US given that the stock is down about 22% this year, while the overall tech sector, as tracked by PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ), is up about 28% this year.

The company is in a poor financial position given that its current debt burden stands at $32 billion, yet the carrier made losses in the current quarter, as compared to a similar period last year. The carrier’s adjusted free cash flow levels were at least 40% lower as compared to a similar quarter in the previous year and the company lost more than $500 million in the first half of this fiscal year.

The carrier currently ranks a distant fourth well behind industry leaders AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) in the wireless services market. The company is also facing new competition from industry newcomers Comcast Corporation (NASDAQ:CMCSA) with their new wireless offer in the form of Xfinity Mobile.

Sprint’s future does not look bright at the moment, but it remains to be seen what the innovative SoftBank CEO, Masayoshi Son shall do to save the troubled company. However, the question on many investors’ minds is whether this is the right time to short Sprint stock.

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