Deutsche Gets Bullish on Sprint (S) Following Meetings, Adds to Short-Term Buy List

March 29, 2012 10:46 AM EDT
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Sprint Nextel (NYSE: S) shares are moving higher Thursday following a bullish call by Deutsche Bank earlier.

The firm recently met with Sprint execs at its headquarters in Kansas and said the meetings were positive overall. Deutsche said the decision was not based on recent results, rather "the quality and depth of management's discussion of key priorities, strategic options, success factors and execution risks."

Five key priorities for management include:
  1. Execute Network Vision. So far it is on plan and initial cost savings are meeting expectations;
  2. Achieve EBITDA & FCF targets. EBITDA seems to be the #1 operating metric in 2012; more important than net adds;
  3. Maximize retention of iDEN subs. Goal is a +20 percent retention rate;
  4. Achieve a high mix of iPhone gross adds. The target is 35% gross adds and 65 percent upgrades; and
  5. Improved customer experience. iPhone + unlimited plans are key tools.
On M&A, management said it would like to do more but said it is focused on execution of its "Network Vision" strategy and is waiting for appreciation in its share price. Sprint won't sit on the sidelines for two years as it continues evaluating opportunities.

Sprint is open to spectrum-hosting deals, but wouldn't affirm any talks. In addition, Sprint sees refarming about of its 800-megahertz licenses in 2014 due to a favorable decision by 3GPP.

In terms of the Apple (Nasdaq: AAPL) iPhone, management said if Verizon (NYSE: VZ) and AT&T (NYSE: T) get a 4G device, Sprint will as well. Field tests reveal the same 4G LTE speeds as Verizon and AT&T.

Finally, Deutsche commented, "Management implied that the working relationship between Sprint and Clearwire (Nasdaq: CLWR) is as strong as it has ever been. For example, the only disagreements at this point relate to where Sprint would like to see Clearwire deploy LTE cell sites."

The firm maintains a Hold rating with a price target of $3, but added Sprint to its "Short-Term Buy" list. Shares are up about 2 percent on the session.


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