Jan 31, 2017
OVERLAND PARK, Kan.--(BUSINESS WIRE)-- Sprint Corporation (NYSE:S) today reported operating results for the third quarter of fiscal year 2016, including more than 5 percent year-over-year growth in net operating revenues and the highest postpaid phone net additions in four years. The company also reported operating income of $311 million and Adjusted EBITDA* of $2.5 billion, both improvements of more than $500 million year-over-year.
“Sprint is turning the corner,” said Sprint CEO Marcelo Claure. “Even with all the aggressive promotional offers from our competitors, we were still able to add more postpaid phone customers than both Verizon and AT&T while continuing to grow revenues, take costs out of the business, and improve the network.”
Highest Postpaid Phone Net Additions in Four Years During Very Competitive Quarter
Sprint’s focus on delivering the best value proposition in wireless resulted in 368,000 postpaid phone net additions in the quarter, its ninth consecutive quarter of year-over-year improvement. Even in a highly competitive quarter with multiple promotional offers from its competitors, Sprint was able to add more postpaid phone customers than both Verizon and AT&T and report its highest postpaid phone net additions in four years. The company also remained postpaid net port positive for the third quarter in a row and had its highest postpaid phone gross additions in four years.
The company also reported the following results:
Top Line Growing as Cost Reductions Continue
Sprint made continued progress on growing revenues and improving the cost structure of the business. Total net operating revenues of $8.5 billion grew by $442 million year-over-year, or more than 5 percent, and cost of service and selling, general and administrative expenses declined by nearly $500 millionyear-over-year, bringing the year-to-date cost reduction to more than $1.6 billion.
As part of its ongoing cost reduction program, the company modified the terms of its vendor agreements associated with the service and repair program on Jan. 1, 2017, which are expected to be accretive to Adjusted EBITDA* by approximately $25 million to $50 million per quarter. Under the terms of the new agreements, the company will now only record the net margin and therefore expects the reduction to wireless service revenues of approximately $200 million per quarter to be more than offset by a greater reduction in cost of service expenses.
The company remains on track to achieve its goal of a sustainable reduction of $2 billion or more of run-rate operating expenses exiting fiscal year 2016 and has plans for further reductions in fiscal year 2017 and beyond.
The company also reported the following financial results:
Improved Operating Performance and Liquidity Position Bolsters Credit Rating
During the quarter the company issued $3.5 billion of spectrum-backed senior secured notes at 3.36 percent, which is about half of Sprint’s current effective interest rate, as part of a $7 billion program aimed at diversifying the company’s funding sources, lowering its cost of capital, and reducing future cash interest expenses. The company also retired $2.3 billion of debt maturities with significantly higher coupon payments and repurchased the devices sold in the first MLS transaction, thus eliminating the associated future lease obligation.
Total liquidity was $9.1 billion at the end of the quarter, including $6.1 billion of cash, cash equivalents and short-term investments. Additionally, the company also has $1.2 billion of availability under vendor financing agreements that can be used toward the purchase of 2.5GHz network equipment.
Based on the company’s sustained operational performance and improved liquidity, Moody’s Investor Service recently upgraded Sprint’s corporate family rating from B3 to B2.
In addition, the company is in the process of refinancing its $3.3 billion unsecured revolving credit facility and expects to complete that process in the coming weeks.
Network Improvements Expected to Continue with High Performance User Equipment (HPUE)
Sprint continues to unlock the value of the largest spectrum holdings in the U.S. by densifying and optimizing its network to provide customers the best experience. Third party sources continue to validate the company’s network performance improvements.