Capital expenditure and free cash flow
In 1Q15, the capital expenditure (or capex) for Sprint Corporation (S) was $2.3 billion compared to $1.2 billion and $2 billion in 1Q14 and 4Q14, respectively. Capex increased YoY due to investments of $556 million in Sprint’s networks and $544 million related to device leasing in the firm’s indirect channels. Capex for AT&T (T) and Verizon (VZ) stood at $4.7 billion and $8.15 billion, respectively.
Sprint’s free cash flow for 1Q15 was -$2.2 billion, compared to -$496 million and -$914 million in 1Q14 and 4Q14, respectively. Cash flow decreased YoY due to unfavorable changes in working capital coupled with high capex. Compared to 4Q14, after adjusting the non-operational impact of $500 million (repayment on receivables facility), free cash flow would have been approximately $1.7 billion in 1Q15, which is similar to the last quarter.
Debt and liquidity
Total liquidity at the end of 1Q15 stood at $6.6 billion, including $2.3 billion of cash, cash equivalents, and short-term investments. In addition to this, Sprint can also utilize its revolving bank credit facility up to $2.9 billion and its receivables facility up to $1.4 billion. Sprint also has $1.3 billion available under vendor financing agreements that will be utilized toward the purchase of 2.5 GHz network equipment.
The firm has been working with Softbank and other partners in order to set up a leasing firm that will finance devices leased by customers. In a new release, Sprint stated that due to “a capital efficient deployment of the network, and funding from the proposed leasing company, Sprint currently does not expect to raise additional capital through the public debt or equity markets in the foreseeable future, nor does it currently expect to sell spectrum.”