Softbank Sale of Alibaba Stake Positive for Sprint (S) - Macquarie

Macquarie analyst, Amy Young, noted that Sprint's (NYSE: S) parent company and 83% owner SoftBank recently sold US$8.9bn of Alibaba. This underscores the analyst's view on Sprint for 2 reasons:

1) by sliming down their stake in Alibaba to 28% from 32% implicitly highlights its long-term commitment to Sprint, as it remains a key asset for the group

2) our Japanese Internet Analyst Nathan Ramler believes SoftBank, specifically President and COO Nikesh Arora, has become active in managing its investment portfolio. This could accelerate the focus on the turnaround of Sprint.

‌Post Alibaba, Sprint constitutes ~24% of SoftBank's value based on Nathan's estimate. The spotlight on Sprint's turnaround – subscriber stabilization, network upgrade, and FCF generation, is likely to be greater.

For Sprint, near-term solvency issue is resolved. There’s US$16bn of committed liquidity for FY16 with ~US$5.7bn as of FY1Q16, enough to pay down debt maturing this year. Financing around a SpectrumCo could be on the way, boosting liquidity one more time. The analyst is more bullish than management, modeling US$108m FCF in FY17, compared to management's break even expectations.

‌No change to Outperform rating or $4 PT.

For an analyst ratings summary and ratings history on Sprint click here. For more ratings news on Sprint click here.

Shares of Sprint closed at $3.75 yesterday.

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