Wednesday, February 10, 2010

Sprint Gambles on 4G No Safety Net

Sprint (S) reported earnings headlining highest annual Free Cash Flow in Sprint Nextel history. The stock still sold off. They also claim $6.6 Billion in liquidity which includes untapped lines of credit. They have lost customers in Q4 and the all important ARPU is down. They are betting/gambling on tomorrow and the 4G system. Here is the big quote

“Sprint 4G is now available in 27 markets serving more than 30 million people, and is expected to cover up to 120 million people by the end of 2010. Sprint 4G service is planned for deployment in many additional markets in 2010, including the following major metropolitan areas: Boston, Houston, New York, San Francisco, and Washington, D.C.”

But Sprint does not discuss the potential capital cost of this very rapid build out as coverage is increased some 400%. They do not discuss the potential ARPU implications.

Will consumers migrate to financially stronger competitors? No one wants bankruptcy turmoil from their cell phone. Many consumers stopped buying GM and Chrysler and swung over to Ford for that very reason.

Management is not sharing how they will execute. The press release was underwhelming. Time to start thinking about strategic objectives.