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Sprint (S) Q4 Loss Wider than Expected, Revenues Beat

Sprint Corp. S reported mixed financial results in the fourth quarter of fiscal 2015 wherein revenues outpaced the Zacks Consensus Estimate while earnings lagged the same.

This Zacks Rank #3 (Hold) stock faces fierce competition in the U.S. wireless market from the likes of Verizon Communications Inc. VZ, AT&T Inc. T and T-Mobile US Inc. TMUS. In order to remain competitive, Sprint recently launched several low-priced data and voice plans.

Quarterly net loss was $554 million or 14 cents per share, wider than a net loss of $224 million or 6 cents per share in the year-ago quarter. Fourth-quarter net loss per share was also wider-than-the Zacks Consensus Estimate of a loss of 12 cents.

Quarterly total revenue came in at $8,071 million, down 2.5% year over year but ahead of the Zacks Consensus Estimate of $8,002 million. Service revenues were $6,574 million, down 7.9% while Equipment revenues totaled $1,497 million, up a substantial 30.9%.

Operating expenses were $8,063 million, up 1.2% year over year. Operating income was a mere $8 million compared with $318 million in the year-ago quarter. Adjusted EBITDA improved a whopping 23.8% year over year to $2,158 million. Adjusted EBITDA margin was 32.8% compared with 24.4% in the year-ago quarter.  

Cash Flow

In the fourth quarter of fiscal 2015, Sprint generated $1,294 million of cash from operations compared with $976 million in the prior-year quarter. Quarterly free cash flow was a marginal $3 million while it was a negative $914 million in the prior-year quarter.

Liquidity

At the end of fiscal 2015, Sprint had $2,641 million of cash and marketable securities compared with $5,253 million at the end of fiscal 2014. Total debt outstanding, at the end of fiscal 2015 was $33,958 million compared with $33,831 million at the end of fiscal 2014. At fiscal 2015 end, the debt-to-capitalization ratio was 0.60, flat year over year.

Wireless Segment

Total segment revenue was $7,651 million, down 0.2% year over year. Postpaid revenues totaled $4,793 million, down 5.1%. Prepaid revenues were $1,203 million, down 5.4%. Wholesale revenues were $155 million, down 18%. Transactions revenues totaled $3 million, down by a substantial 97.5%. Equipment revenues were $1,497 million, up 30.9% year over year.

Wireline Segment

Total segment revenue was $562 million, down 15.9% year over year. Voice revenues totaled $194 million, down 26.5%. Data revenues were $37 million, down 28.8%. Internet revenues were $316 million, down 5.7%. Other revenues were $15 million, down 11.8% year over year.

Subscribers Statistics

In the reported quarter, Sprint gained 56,000 postpaid subscribers, 655,000 wholesale customers but lost 264,000 prepaid customers. As of Mar 31, 2016, Sprint had 58.806 million wireless customers, up 4.8% year over year. This includes 30.951 million postpaid, 14.397 million prepaid and 13.458 million wholesale customers.

Quarterly total retail postpaid churn rate was 1.72% compared with 1.84% in the year-ago quarter. Total retail prepaid churn rate was 5.65%, up from 3.84% in the prior-year quarter. Total retail postpaid ARPU (average revenue per user) was $51.68, down 9.2% year over year. Total retail pretpaid ARPU was $27.72, up 0.8% year over year.

Outlook

Sprint expects fiscal 2016 adjusted EBITDA of $9.5 billion to $10 billion and operating income of $1 billion to $1.5 billion. Capital expenditures will be approximately $3 billion. Adjusted free cash flow will be around break-even.

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