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Analyzing Sprint’s Free Cash Flow and Capex Plan

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Sprint’s capital expenditure

Sprint (S) continues to invest in capex (capital expenditure) to improve its network. It believes it’s uniquely positioned and will have a capital intensity advantage compared to its peers in the long term, given its spectrum depth.

On March 7, 2017, at the Deutsche Bank Media, Internet and Telecom Conference, Tarek Robbiati, Sprint’s chief financial officer, talked about Sprint’s free cash flow and capex plan going forward. He said, “From a free cash flow standpoint, we feel that the combination of the cost takeout on the OpEx side plus driving CapEx intensity to levels that were lower than anything that was experienced, will sustain free cash flow generation for Sprint.”

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In fiscal 3Q16, Sprint spent more than $1.2 billion on cash capex. That compares to $0.80 billion in fiscal 2Q16 and $1.6 billion in fiscal 3Q15. The main reason for this significant fall was lower network spending. The company is focusing on lower capex through carrier aggregation and small cell deployments.

Expected capex investments

Sprint expects its cash capex to be 2.0 billion–$2.3 billion in fiscal 2016, which ends March 31, 2017. It excludes the impact of leased devices sold through indirect channels. The company expects spending to ramp up in fiscal 2017 since it has secured more small cell permits to implement its densification plan. However, it doesn’t expect to return to historical levels of $5.0 billion–$6.0 billion.

In comparison, competitor AT&T (T) expects to spend ~$22.0 billion in capex in 2017. Verizon (VZ) expects its 2017 capex to be $16.8 billion–$17.5 billion. T-Mobile (TMUS) expects its 2017 cash capex to be $4.8 billion–$5.1 billion, excluding capitalized interest.

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