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Sprint’s Ongoing Turnaround Will Yield a Double Soon

November 11, 2013 | About:
Muhammad Bazil

Muhammad Bazil

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Sprint (S), the third giant telecom company in the U.S., by wireless telecom services after Verizon (VZ) and AT&T (T), is gradually turning around from being a stock some analysts predicted would be a 100 percent loss to its shareholders to being the favorite of customers and value investors just within a space of a year and a few months. Thanks to Softbank’s (OTC: SFTBF) successful acquisition of majority position in Sprint in a transaction valued at over $21 billion. As at the moment, Sprint is in the middle of a complete network turnaround and upgrading of its systems at almost every location across the 50 states in the U.S., the U.S. Virgin Islands, and Puerto Rico.

The company aims to bring the efficient 4G Long Term Evolution (LTE) technology to each of its cell sites as fast as it could in the months ahead, although Softbank’s founder, Masayoshi Son, while drawing on his previous experience with similar acquisitions hinted recently that Sprint’s ongoing network turnaround could last longer than initially planned. Son suggested that the turnaround could last up to six months or a year or at most two years in the following words:

"It took around a year after Softbank bought Vodafone (before) we reached the No. 1 position of net gains in subscribers. It takes time to get devices ready and prepare services and the network ...’’ ‘’…at the very least you need half a year or a year. And for anything substantial you need one or two years."

Sprint is currently pursuing building of a broader subscriber base and possibly beat the competition in market share by using a combination of different strategies that includes offering existing and prospective customers with unlimited data plans or more data options for their devices, deploying a compensation policy that is more favorable to customers, and the incorporation of improved technologies that will ensure quality of its voice and data services to users going forward.

Sprint and Softbank Are on Page

It seems that Softbank and Sprint realized they shared similar turnaround plans before the acquisition of Sprint was consummated by Softbank, Japan’s fastestgrowing wireless telecoms company. For example, Softbank believed in using efficient telecoms technology to gain customer satisfaction which made the company to deploy superior network technology into its Japanese operations while Sprint has been working on its enhanced 4G LTE technology before majority of its shares were acquired by Softbank. Also, Softbank became the leading vendor of smartphones in Japan by offering mouth watering data options to their existing and prospective customers and Sprint has also been an ardent believer in using unlimited voice and data plans to gain market share. In that vein, it won’t be difficult for Sprint to source the financial resources it requires from Softbank to boost its network and general operations in line with its plan for growth. That, in my view, shows that Sprint will succeed with its turnaround plan and will once again be the darling of customers and investors and one of the major wireless companies to be reckoned with in the U.S.

Sprint’s Unlimited Voice and Data Plans Will Boost Subscriber Base

While Verizon and AT&T have both discontinued their unlimited offerings, Sprint stuck to it by launching its ‘’Unlimited Guarantee and New Unlimited, My Way Plan’’ last July. The unlimited plan is still ongoing under Softbank’s new ownership. While some may argue that the unlimited plan offering will eat deep into the Sprint’s margins on the long run, I think the company knows that and its management is probably working on using huge market share that will result from the offerings to leverage its cash flow and margins. I think if that strategy worked for Softbank and transformed the company into Japan’s best seller of smartphones; it will work for Sprint on the long run.

Sprint’s Future Outlook

Though Sprint currently offers zero dividends yet the stock remains a buy for value investors on the basis of its future prospects. Firstly, Sprint is being financially supported by Softbank to re-engineer its network and its technology applications. Secondly, the incentives Sprint is offering existing and prospective subscribers is enough for the company to improve its subscriber base fast and even pose a real threat to Verizon’s and AT&T’s market shares in no distant time. Therefore, there is every reason to believe that the stock will enjoy greater price appreciation once the company is turned around to the extent it begins to gain more subscribers, earn more incomes, turn in profits, and pay a dividend. Also, there is the possibility that many institutional investors like pension and mutual funds will start to buy into the company once it begins to show signs of financial stability leading to price appreciation for its stock.

About the author:

Muhammad Bazil
Muhammad Bazil is a financial journalist and editor for a variety of websites, public policy organizations, and book publishers. He has written hundreds of published articles and blog posts on topics including budgeting, credit management, real estate and investing. His articles have been featured on the homepage of Yahoo!, MSN and numerous local news websites.

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