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Sprint Boosted Adjusted EBITDA with Cost Savings

Sophia Nicholson - Author
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Dec. 4 2020, Updated 10:52 a.m. ET

Sprint’s cost-cutting efforts

Sprint (S) has been making serious efforts to cut its costs to revive its profits in the wireless space and has eliminated more than $1 billion in costs in each of the past four years. Sprint has already saved approximately $6.0 billion in costs over the last four years. For the fiscal year, the company predicts gross cost savings of more than $1 billion for the fifth straight year. The company expects net cost reductions of less than $500 million as the company plans to reinvest in the Next-Gen Network, digital capabilities, and other initiatives.

During the second quarter of fiscal 2018, Sprint realized nearly $100 million in net cost reductions including lowering cost of services and selling, general, and administrative expenses.

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Cost savings led to higher EBITDA growth

Sprint’s cost reduction measures have significantly improved the company’s net income. Sprint delivered net income of $207 million in the quarter, after incurring a loss of $48 million in the year-ago quarter. The company also reported adjusted operating income of $778 million, up 29.5% YoY. Sprint generated net income for the fourth consecutive quarter and reported operating income for the 11th consecutive quarter.

The company also posted adjusted EBITDA of $3 billion in the second quarter, up $300 million YoY, marking the highest fiscal second-quarter EBITDA in the last 12 years. Owing to cost savings efforts and strong year-to-date growth trends, Sprint has raised its adjusted EBITDA guidance to a range of $11.7 billion to $12.0 billion, above the previous expectations of $11.3 billion to $11.8 billion excluding the impact of the revenue recognition standard.

T-Mobile and Sprint merger

Sprint is awaiting merger approval with rival T-Mobile (TMUS) and expects the combined entity’s adjusted EBITDA to lie in the range of $22.0 billion–$23.0 billion in fiscal 2018. The merger is also likely to intensify competition with the dominant players, Verizon (VZ) and AT&T (T), in the telecom industry, as well as grow its scale and generate cost synergies.

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