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Sprint to Get $1.2B From New Leasing Venture

Dan Jones
11/23/2015

Sprint got financial relief Friday in the form of a commitment for a $1.2 billion loan from a new device reseller formed by Sprint's parent, SoftBank, and other investors.

Mobile Leasing Solutions, LLC, is the new entity, backed by SoftBank Corp. and other equity investors who have secured financing from leading banks, on better terms than going to the debt market, Sprint says. Sprint is selling the operation $1.3 billion of leased device assets, in return for a total of $1.2 billion in financing when the deal closes, which is expected in December.

The agreement will get the leasing costs off Sprint's books and help improve its overall liquidity, Sprint said in a statement. The deal will not be a one-off; the company can repeat such agreements quarterly, new Sprint CFO Tarek Robbiati said in an investor call on Friday.


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The deal keeps it all in the Sprint extended family. Sprint CEO Marcello Claure's former company Brightstar Corp. , which is part owned by SoftBank, helped to set up the operation and will provide tracking for the used, off-lease devices that the program generates.

The deal should help ease the financial pressure on Sprint somewhat. The company has said that it needs to reduce its overall expenses by $2 billion by the end of fiscal 2016, which is expected to result in thousands of job cuts. (See Sprint to Take $2B Shave, Sprint Undercuts Rivals With Half-Price Offers, Should CEO Pay Be Part of Sprint's $2B Shave? and Sprint, Verizon Face Reorganization, Job Cuts.)

— Dan Jones, Mobile Editor, Light Reading

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kq4ym
kq4ym
12/6/2015 | 4:44:11 PM
Re: Out one pocket and in the other
With that latest deal, I wonder if they still will make the $2 billion cuts as forecast. It would seem the pressure has been relieved and maybe not so many jobs will be cut?
DanJones
DanJones
11/24/2015 | 1:01:19 PM
Re: Out one pocket and in the other
So, so true, Karl. 
KBode
KBode
11/24/2015 | 12:29:56 PM
Re: Out one pocket and in the other
A lot of Wall Street analysts seem to think Sprint's spending is right in line with its size and that the cutbacks are an over-reaction? Then again I see a lot of Wall Street analysts that don't understand the slightest thing about the sector they're analyzing.
mendyk
mendyk
11/24/2015 | 11:47:16 AM
Re: Out one pocket and in the other
We tend to forget that Sprint has been carrying legacy baggage for years. A lot if it has been shed, but not all of it.
danielcawrey
danielcawrey
11/24/2015 | 11:23:26 AM
Re: Out one pocket and in the other
It's awful that people are going to be losing their jobs, but it's clear now that Sprint is just way too big and needs to make cuts in many places.

I think that most people refer to Sprint as a small rival to that of Verizon and AT&T, and I think that's accurate. The company just needs to adjust accordingly in order to compete. 
DHagar
DHagar
11/23/2015 | 9:12:46 PM
Re: Out of one pocket and in another
mendyk, I am in agreement with your assessment, and Dan's.   This may buy them more time but the money will still burn through those pockets, particularly if they still have cash holes in them.  Somewhere they have to "make money".

This certainly gives them hope though if they can put things together.
DanJones
DanJones
11/23/2015 | 2:01:50 PM
Re: Out one pocket and in the other
Agreed!
mendyk
mendyk
11/23/2015 | 1:36:52 PM
Re: Out one pocket and in the other
This seems mainly a window dressing -- or balance-sheet dressing -- move that will make a future quarterly report look better. Again, a tactic that has been used before by the owner.
DanJones
DanJones
11/23/2015 | 1:02:00 PM
Re: Out one pocket and in the other
It takes some of the immediate cash pressure off, but I don't think it does anything for them in the long-term, no. Their problem is three-fold: Grow customer base, buildout and densify their fast 4G, while cutting costs. That's still a tough nut to crack, you know? Cash helps, but it doesn't fix the issue.
mendyk
mendyk
11/23/2015 | 10:54:44 AM
Out one pocket and in the other
This looks like a classic Son deal -- essentially a cash infusion from his other reserves to make Sprint's financials look better. Or less worse. But does it change anything?
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