Sprint (S) is in Prickly Situation... Will Investors Hold on For 4G? - Barron's
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Sprint Nextel (NYSE: S) shares might soon be ending a recent run as the stock was highlighted in a bearish Barron's article over the weekend.
The publication said there has been no word from Sprint on how to protect and expand it's 4G network -- something investors expected to hear about by now. The company's EBITDA, at 19 percent, is far below competitors Verizon (NYSE: VZ) and AT&T (NYSE: T), each with more robust EBITDA margins of 40 to 45 percent.
Clearwire (Nasdaq: CLWR), which is 54 percent owned by Sprint, runs Sprint's 4G network. Clearwire needs more money to increase its coverage, according to Barron's, which is about half of what it should be.
Related to rumors of a tie-up with Philip Falcone's LightSquared, Barron's said should a deal go though, Sprint is likely to either reduce its stake or minimize its partnership with Clearwire. The deal has Sprint and LightSquared splitting about $15 to $20 billion in new costs.
Sprint could also build out its own network for 4G services, but the costs behind such a move would certainly negate expected savings from its Network Vision plan.
With potential additions of new debt on a LightSquared deal or heightened expenses associated with going-it-alone to create it's own 4G network, Barron's wonders how long investors will continue holding on with Sprint as more uncertainty lies ahead.
Shares of Sprint last traded at $5.38, down about 0.9 percent from Friday's closing price.
The publication said there has been no word from Sprint on how to protect and expand it's 4G network -- something investors expected to hear about by now. The company's EBITDA, at 19 percent, is far below competitors Verizon (NYSE: VZ) and AT&T (NYSE: T), each with more robust EBITDA margins of 40 to 45 percent.
Clearwire (Nasdaq: CLWR), which is 54 percent owned by Sprint, runs Sprint's 4G network. Clearwire needs more money to increase its coverage, according to Barron's, which is about half of what it should be.
Related to rumors of a tie-up with Philip Falcone's LightSquared, Barron's said should a deal go though, Sprint is likely to either reduce its stake or minimize its partnership with Clearwire. The deal has Sprint and LightSquared splitting about $15 to $20 billion in new costs.
Sprint could also build out its own network for 4G services, but the costs behind such a move would certainly negate expected savings from its Network Vision plan.
With potential additions of new debt on a LightSquared deal or heightened expenses associated with going-it-alone to create it's own 4G network, Barron's wonders how long investors will continue holding on with Sprint as more uncertainty lies ahead.
Shares of Sprint last traded at $5.38, down about 0.9 percent from Friday's closing price.
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