Boost Mobile Founder Seeks to Buy Brand from Sprint



Boost Mobile founder Peter Adderton is seeking to buy back the prepaid brand from Sprint (S) for $2 billion, which suggests that the wireless asset could draw a significant premium. The satellite TV operator Dish Network (DISH) has agreed to pay $1.4 billion for all of Sprint’s prepaid businesses.

According to a Reuters report on November 19, “Ever since the merger between T-Mobile and Sprint was announced last year, Adderton has been outspoken on Twitter that the combination would harm lower-income consumers who depend on prepaid phones, where users pay for phone service at the beginning of the month and are not required to pass a credit check.”

The report added, “Adderton has also questioned Dish’s commitment to serving Boost customers, as the satellite company has focused its priorities on building a next generation 5G wireless network.”

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T-Mobile and Sprint merger deal

In July, the Department of Justice conditionally approved T-Mobile’s (TMUS) $26.5 billion merger with smaller competitor Sprint. Under the terms of the deal, the two companies agreed to divest Sprint’s prepaid businesses, including Boost Mobile and Virgin Mobile, to Dish for $1.4 billion. Dish will also acquire certain wireless spectrum for $3.6 billion.

Earlier this month, the Federal Communications Commission also gave the deal its blessing on the condition that the proposed new T-Mobile deploy 5G network services across the US.

However, the merger deal between T-Mobile and Sprint still faces a lawsuit filed by various state attorneys general and the District of Columbia. The multistate lawsuit alleges that the combination of the third- and fourth-largest wireless carriers is harmful to wireless consumers. A trial for the lawsuit will start on December 9.

Currently, Sprint and T-Mobile are in talks to renegotiate the terms of the merger deal, which expired on November 1. According to a Reuters report on November 7, T-Mobile CEO John Legere stated that discussions about the terms of the merger deal could include the price.

Legere has decided to step down on April 30, 2020.

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Sprint’s financial performance

In the second quarter of fiscal 2019 (which ended on September 30), Sprint’s revenue of $7.8 billion missed analysts’ estimate of $8.2 billion by nearly 4.6%. Its EPS of -$0.07 also missed analysts’ estimate of -$0.02 in the quarter. Sprint reported EPS of $0.05 on total revenue of $8.4 billion in the same quarter a year ago. The company lost 91,000 postpaid phone net customers. In the quarter, Sprint’s postpaid phone churn rate was 1.91%, which was the highest in the wireless industry.

Sprint reported total liquidity of $6.9 billion at the end of the second quarter, which includes $4.3 billion in cash and cash equivalents. As of September 30, Sprint’s balance sheet is constrained with $37.4 billion of total debt with about $2.7 billion of debt maturities over the next four quarters. In the second quarter, the company reported adjusted free cash flow of -$45 million compared to -$58 million in the previous quarter and $525 million in the second quarter of fiscal 2018.

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Analysts expect Sprint’s sales to fall 3.5% YoY to $32.4 billion in fiscal 2019 and 0.8% YoY to $32.2 billion in fiscal 2020. Its sales will likely reach $32.1 billion in fiscal 2021. Analysts also expect the company’s EPS to reach -$0.17 in fiscal 2019, -$0.12 in fiscal 2020, and -$0.05 in fiscal 2021.

Analysts’ price targets

Wall Street analysts remain cautious on Sprint stock. Among the 16 analysts covering the company, 13 recommend “holds,” two recommend “sells,” and one recommends a “buy.” Based on analysts’ consensus estimates, Sprint stock has a mean target price of $6.22, which suggests a potential upside of 6.1% over the next 12 months.

T-Mobile stock was rated as a “buy” by 16 out of 21 analysts or 76% of the analysts surveyed.

Stock performance

Sprint stock rose about 0.5% on November 18 and closed the trading day at $5.86. The stock was trading 27.3% below its 52-week high and 7.7% above its 52-week low.

Based on Sprint’s closing price on November 18, it’s reported returns of -0.9% in the last five trading days, -8.7% in the trailing month, and -7.1% in the trailing 12 months. The company has gained 0.7% YTD (year-to-date). AT&T (T) and T-Mobile are up 38.9% and 22.9% YTD, respectively.

On November 18, Sprint closed 4.6% below its 20-day moving average of $6.14 and 7.1% below its 50-day moving average of $6.31. It was also trading 11.7% below its 100-day moving average of $6.64.

Sprint’s 14-day MACD is -0.21, which suggests a downward trading pattern. The stock’s 14-day relative strength index score of 37 suggests that it’s approaching the oversold zone. On November 18, it closed near its lower Bollinger Band level of $5.78, which suggests that it’s oversold.

On November 18, Sprint’s market cap was $24.1 billion. In comparison, AT&T and T-Mobile have market caps of $289.5 billion and $66.9 billion, respectively.

To learn more, read Sprint Fairly Valued at $3 per Share amid T-Mobile Merger and Sprint Expands Its 5G Network Coverage in Nine Cities.


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