Sprint: Revenue up 3%, Capex Will Rise Again

Sprint posted its first year-over-year revenue gain in two years on Tuesday for the second quarter of its 2016 fiscal year, as analysts asked how low the operator's capex could go.

Sprint Corp. (NYSE: S) posted net operating revenue of $8.25 billion, up 3% compared to $7.97 billion a year ago, while its quarterly net loss of $142 million -- or $0.04 per share -- was clearly an improvement on the net loss of $585 million -- or $0.15 per share -- a year ago.

Sprint also added more subscribers on a monthly contract (postpaid) for the quarter ending in September. Postpaid additions in the quarter were about 347,000, around 285,000 more than in the year-earlier period. "I think we're doing relatively good in acquiring new customers," said CEO Marcello Claure during an earnings call with analysts.

Analysts on the call, however, seemed to key in on the continuing reductions to Sprint's spending on its network. "There is a way you can do a lot more with less," said CEO Marcello Claure on the call.

Sprint has drastically cut its capital expenditure (capex) over the last couple of years, as it moves to a small cell-based network densification strategy. For instance, in the second quarter of 2013, Sprint spent as much as $1.9 billion on capex. On the call on Tuesday, Sprint CFO Tarek Robbiati said that the operator spent just $800 million during the second quarter of 2016. (See Sprint Promises Better LTE on Lower Capex.)

Sprint has been getting together its permits and authorizations to deploy more small cells in its 2.5GHz densification program. "Permits have doubled from last quarter," Sprint CTO John Saw said, noting that the operator has now deployed 200 small cells in Manhattan.

Robbiati said that Sprint has been keeping its spend down through "surgical small cell deployments" and software updates on the network. Sprint started making two-channel carrier aggregation (2CA) software updates last year and has started deploying three-channel CA this year. Carrier aggregation involves bonding separate 4G radio channels to boost speed and capacity. (See Sprint Ups the 4G Speed Ante to 230 Mbit/s.)

Nonetheless, as the operator gets its permits to deploy small cells, capex spending will rise. The network expenditure will start to "ramp up" in the second half of Sprint's 2016 financial year and through 2017.

Robbiati said cost-controls in other areas are still kicking along nicely for Sprint. The CFO told analysts that Sprint reduced costs by $580 million in the second quarter and by $1.1 billion in the year to date. (See Sprint to Take $2B Shave.)

Sprint couldn't comment much on its spectrum-lease/buyback notes issuance yet, with the bids still underway. Nonetheless, Robbiati described it as "over-subscribed." (See Sprint Plots $3.5B Spectrum Sale/Lease-Back.)

CEO Claure did comment briefly on the $85.4 billion AT&T Inc. (NYSE: T)-Time Warner Inc. (NYSE: TWX) deal. He said that he had been taking calls from bankers over the weekend. (See AT&T Shakes Industry With $85B TW Bid.)

"Our strategic value to many has definitely grown," the CEO said.

Claure echoed remarks made by T-Mobile US Inc. 's CEO John Legere. "We're very confident the US regulatory system is going to work... Relevant content is going to be available to us," Claure contended. He added that Sprint's large 2.5GHz spectrum holdings will make it an important player in the mobile video future. (See T-Mobile: AT&T & TW Means Ma Bell Not Focused on Mobile.)

Despite sales improvements, Sprint's share price had fallen by $0.53 -- or 7.59% -- to $6.40 at the time of publication.

— Dan Jones, Mobile Editor, Light Reading

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