US wireless carrier Sprint is creating a network-related financing entity that it says could provide US$3bn to US$5bn in incremental funding in the 2016 fiscal year. Sprint, which reported a net loss of US$836m for the quarter, expects the first transaction to close by the middle of the calendar year.
US wireless carrier Sprint (NYSE:S) is creating a network-related financing entity that it says could provide US$3bn to US$5bn in incremental funding in the 2016 fiscal year.
The new vehicle, developed with majority shareholder Softbank and its partners, is expected to raise proceeds from Sprint’s existing radio access equipment, a combination of new assets associated with its network densification plans, and a “small portion” of its spectrum, the company said in its Q3 2015 results statement today.
Sprint, which reported a net loss of US$836m for the quarter, expects the first transaction to close by the middle of the calendar year.
During a conference call on the results, Sprint stressed that it is important for the company to retain ownership of the spectrum to be used as collateral for the new entity. It also emphasised that only a “very, very small amount” of its total bandwidth will be used.
In its latest results, Sprint noted that two key transactions that closed during Q3 immediately improved its total liquidity, which amounted to $6bn at the end of the quarter. The company also has about US$600m of vendor financing available.
One of these transactions was its first sale-and-leaseback deal via its new leaseco, Mobile Leasing Solutions, which provided a US$1.1bn cash infusion. The company expects to execute future transactions via the leaseco on an approximately quarterly basis, raising US$3bn to US$4bn in fiscal 2016, depending on the number of lease sales to customers.
The second significant transaction was the amendment of an existing receivables facility to include the sale of certain future lease receivables, thereby increasing the maximum funding from US$1bn to US$4.3bn.
“Together with existing facilities, these sources of liquidity are expected to fund the transformation and repayment of all maturities that come due over the next year,” Sprint said.
During the conference call, the company provided a bit more colour on its network overhaul plans, which spooked analysts and investors when reported by the media in mid-January.
Sprint said it will focus on cost-effective network densification, deploying dark fibre and wireless backhaul. It also intends to overbuild certain high-roaming areas and work with Competitive Carriers Association partners to boost its LTE presence.
The telco noted that it will not default on its tower leases, most of which run for a further five to seven years. Sprint said it expects to continue to have strategic partnerships with towercos but is always looking for ways to reduce costs.
Sprint reported net operating revenues of US$8.1bn, down 10% year-on-year, which the telco attributed to lower wireless service and equipment revenues. Adjusted EBITDA beat forecasts, prompting the company to raise its 2015 fiscal year adjusted EBITDA guidance from US$6.8bn-US$7.1bn to US$7.7bn-US$8bn. Its preliminary estimate for 2016 fiscal year adjusted EBITDA is US$9.5bn-US$10bn.
On the conference call, Sprint declined to specify when it aims to become free cash flow positive but said it understands the importance of doing so as soon as possible.
The telco said it remains confident in its plan to cut US$2bn or more of run-rate operating expenses exiting fiscal 2016, with most coming from selling, general and administrative (SGE) cutbacks.
