Wednesday, September 16, 2015

Is Sprint a Problem that Cannot be Solved?

Some problems arguably are not possible to solve, as much as we want to believe that all problems, given will and effort, are in fact capable of being resolved. Meaning no disrespect, perhaps Sprint continues to be a case of the problem that cannot be solved, as hard as smart talented people continue to try.

Moody's Investors Service has downgraded several ratings of Sprint Corporation debt obligations.

“Today's rating action reflects Moody's view that the numerous operational and network initiatives, management changes, and funding plans recently announced by Sprint and its parent company and majority shareholder, SoftBank Group Corp. ("SoftBank"), will be insufficient to stabilize Sprint's operations in the next few years,” Moody’s said.

“The brutal competition now playing out in the US wireless industry will pressure the financial performance of even the strongest operators,” said Moody’s.

The problems are that Sprint's cash consumption remains high, liquidity remains weak and leverage high. That means concern about Sprint’s ability to  refinance its large upcoming debt maturities.

Despite some improvement in operating metrics (reduced churn, decrease in postpaid handset losses), capital markets will require more collateral.

That is why Sprint is creating two leasing companies to finance customer devices and network equipment.

Hard work, talent and even luck sometimes are not enough. Sometimes companies just run out of time, assets to sell and cash.

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