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Sprint’s Focus Is Its Cost-Cutting Initiative

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Sprint’s cost-saving initiative

In the last part of the series, we learned about Sprint’s (S) deal with Mobile Leasing Solutions for the sale and leaseback of handsets. During the UBS Global Media and Communications Conference on December 7, 2015, Sprint’s CFO (chief financial officer) Tarek A. Robbiati also talked about the company’s focus on cost-cutting in 2016.

Talking about the companies priorities, Robbiati said, “So in terms of priorities, it’s pretty simple. It’s cost cuts, cost cuts, and again cost cuts. That’s where we have to focus on. It’s fundamental for us to turn the operating performance trajectory of the business and take cost out.”

According to the company, it has planned annual cost savings to the tune of at least $2 billion for fiscal 2016. Note that according to Sprint, these savings are expected to come from within operating expenses, and they exclude certain transformation program costs.

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Sprint’s losses

Rationalizing costs is of particular significance for Sprint, because since fiscal 2Q14 (calendar 3Q14), it has been reporting losses in successive quarters. The telecom company even had an adjusted loss per share of ~$0.11 in fiscal 2Q15. The company’s top line continued to shrink during the quarter.

In fiscal 2Q15, Sprint’s revenue declined ~6% YoY (year-over-year) to ~$8 billion. During the quarter, revenue from the company’s wireless segment fell ~5.2% YoY to ~$7.5 billion. Meanwhile, its wireline revenue fell by ~14% YoY to reach ~$0.61 billion.

For a diversified exposure to the top four US wireless players, you may consider investing in the iShares US Telecommunications ETF (IYZ). Please note that together, AT&T (T), Verizon (VZ), T-Mobile (TMUS), and Sprint made up ~30.1% of IYZ at the end of October 2015.

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