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A Detailed Look at Sprint’s Cost-Savings Program

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Cost cutting to combat losses

Sprint (S) is the fourth-largest mobile carrier in the US (SPY) wireless market by number of subscribers, but its significant cost-saving measures and its shift away from the traditional subsidy model appear to have fueled a turnaround. In fiscal 3Q17 (quarter ending December 2017), Sprint realized ~$260 million in net cost reductions, including lower costs of services and SG&A (selling, general, and administrative) expenses.

The carrier eliminated $2.1 billion in costs during fiscal 2016. These reductions are particularly important for Sprint, as it continues to generate losses on an adjusted basis.

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Sprint continues to expect an additional $1.3 billion–$1.5 billion in net cost reductions in fiscal 2017. With more than $1.0 billion saved so far, the telecom company is on track to achieve its goal for fiscal 2017. These cost reductions were mainly driven by changes to the device insurance program as well as lower network expenses.

Highest quarterly EBITDA for a fiscal third quarter

Sprint’s ongoing initiatives to reduce its costs and expenses have been reflected in the company’s improving net income. Notably, the company returned to profitability in the first quarter of fiscal 2017, after incurring losses for the past three years.

Sprint reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $2.7 billion in fiscal 3Q17—its highest quarterly adjusted EBITDA for a fiscal third quarter in the past 11 years.

Sprint has also shown no signs of slowing down, with 184,000 postpaid phone net customer additions in fiscal 3Q17, which marked the tenth-straight quarter of net additions.

Meanwhile, Verizon Communications (VZ) and T-Mobile (TMUS) added 431,000 and 891,000 postpaid phone net customers, respectively, in calendar 4Q17. AT&T (T) gained 329,000 postpaid phone net customers during the same period.

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