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Sprint Nextel Corp. Series 1 Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 3, 2012 05:22PM
Sprint Nextel Corp. Series 1 (S) filed Quarterly Report for the period ended 2012-03-31. Sprint Nextel has a market cap of $7.1 billion; its shares were traded at around $2.535 with and P/S ratio of 0.2.
Highlight of Business Operations:Equipment revenue increased $40 million, or 6%, for the three-month period ended March 31, 2012 as compared to the same period in 2011 and cost of products increased $486 million, or 27%, for the three-month period ended March 31, 2012 as compared to the same period in 2011. The increase in both equipment revenue and cost of products is primarily due to a higher average sales price and cost per device sold for postpaid and prepaid devices, particularly driven by the introduction of the more expensive iPhone to postpaid subscribers, combined with a slight increase in the number of prepaid devices sold and partially offset by a decline in the number of postpaid devices sold. As a result of a growing number of postpaid and prepaid subscribers moving to smartphone devices, we expect the trend of increased equipment net subsidy to continue.
Voice revenues decreased $69 million, or 14%, for the three-month period ended March 31, 2012 as compared to the same period in 2011 primarily driven by overall price declines of which $46 million was related to the decline in prices for the sale of services to our Wireless segment as well as volume declines due to customer churn. Voice revenues generated from the sale of services to our Wireless segment represented 30% of total voice revenues for the three-month period ended March 31, 2012 as compared to 31% for the three-month period ended March 31, 2011.
Internet revenues reflect sales of IP-based data services, including MPLS, VoIP, SIP, and managed services bundled with IP-based data access. Internet revenues decreased $44 million, or 9%, for the three-month period ended March 31, 2012 as compared to the same period in 2011. Certain MSO's have decided to in-source their digital voice products resulting in a $51 million decrease in the three-month period ended March 31, 2012 as compared to the same period in 2011. In addition, Internet revenues generated from the sale of services to our Wireless segment increased in the three-month period ended March 31, 2012 due to an increase in the requirements to support wireless customers' data traffic related to increased smartphone usage, slightly offset by a decline in prices. Sale of services to our Wireless segment represented 10% of total Internet revenues in the three-month period ended March 31, 2012 as compared to 6% for the three-month period ended March 31, 2011.
Net cash used in investing activities for the first three months of 2012 increased by $514 million from 2011, primarily due to a decrease of $150 million in proceeds from sales and maturities of short-term investments, and increases of $137 million in purchases of short-term investments and $139 million in capital expenditures. Increases in capital expenditures were primarily related to Network Vision spend and the addition of legacy 3G data capacity to our wireless networks. We also recognized $128 million in the form of a note receivable from Clearwire as a result of the additional investment provided through our amended agreement in the fourth quarter 2011.
The terms and conditions of our revolving bank credit facility require the ratio of total indebtedness to trailing four quarters earnings before interest, taxes, depreciation and amortization and certain other non-recurring items, as defined by the credit facility (adjusted EBITDA), to be no more than 4.5 to 1.0. In October 2011, our credit facility was amended to prospectively redefine adjusted EBITDA to exclude costs comprising equipment net subsidy, as defined by the amended agreement, to the extent such costs exceed $1.1 billion in any of the six consecutive fiscal quarters ending March 31, 2013. The amount added back related to this exclusion cannot exceed $1.75 billion in any four consecutive fiscal quarters and is limited to $2.7 billion in the aggregate for the six consecutive fiscal quarters ending March 31, 2013. As of April 1, 2012, the ratio is to be no more than 4.25 to 1.0, and will be further reduced to 4.0 to 1.0 after December 31, 2012. As of March 31, 2012, the ratio was 4.0 to 1.0 as compared to 3.7 to 1.0 as of December 31, 2011. Under this revolving bank credit facility, we are currently restricted from paying cash dividends because our ratio of total indebtedness to adjusted EBITDA exceeds 2.5 to 1.0. The terms of our revolving bank credit facility provide for an interest rate equal to the London Interbank Offered Rate (LIBOR), plus a margin of between 2.75% to 4.0%. Certain of our domestic subsidiaries have guaranteed the revolving bank credit facility.
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