Oct 102011

Sprint had announced earlier that it would be speeding up the LTE roll out. But the investors turned hostile on late Friday amid reports that the US operator was not upfront about costs relating to its LTE and iPhone rollouts.

As a consequence, Sprint shares closed down 20 percent on Friday following the firm’s Investor Day in New York where it unveiled plans to speed up migration to LTE.

According to Mobile Business Briefing

Investors appear worried that this aggressive strategy could see the firm burn through cash over the next few years, a situation that may be exacerbated by the operator’s decision to begin offering the iPhone, which will see it pay considerable subsidies to Apple.

….Sprint will need to pay US$500 to subsidise each iPhone it sells, leading it to lose money on the device until 2014. CEO Dan Hesse noted during the Investor Day only that the device would be accretive to Sprint’s cash flow and profitability over time.

Since the cash burn is inevitable, and as Sprint plans to complete the LTE roll out by 2013, analysts have stamped it as “highly uninvestable”.

Walter Piecyck with BTIG Research in a research note quoted

…After a slate of presentations that were far short on details, the Q&A session got ugly as the management team continued to avoid providing any detailed answers and in many cases offered responses so short and void of details that the CFO was actually laughed at…

…We believe Sprint is uninvestable until they can provide better clarity on Ebitda, their 4G strategy and their capital structure.

The whole process is too pricey, and Sprint is eyeing long term profits. But the investors are too worried about the short term losses. Their concern is a significant reduction in liquidity until 2013 since the upgrade would cost $5 billion.

Now that is a lot of money for the investors to worry about.

Related posts:

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  2. Apple plans press event on 9th of September
  3. Strategy Analytics: Q4 2009 handset shipments up by 10%
  4. Apple plans more China investments
  5. PSA: Sprint ETF settlement – there’s cash to fetch

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