Sprint cuts Capex to $2.3 bn in fiscal 2016, achieves cost reduction

sprint-and-technologySprint, a SoftBank company, will cut its cash capital expenditures (Capex), excluding devices leased through indirect channels, to nearly $2.3 billion in fiscal 2016 from the earlier planned less than $3 billion.

Sprint also said its Adjusted EBITDA will be $9.7 billion to $10 billion against the previous expectation of $9.5 billion to $10 billion.

The company expects operating income of $1.4 billion to $1.7 billion as compared with the previous expectation of $1.2 billion to $1.7 billion.

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Sprint said its operating revenues of $8.5 billion grew more than 5 percent in Q3 fiscal 2016. This is the second consecutive quarter of growth. Sprint said postpaid phone net additions of 368,000 were the highest in four years. Sprint claimed that it beat both Verizon and AT&T for the fourth consecutive quarter.

Sprint posted net loss of $479 million, operating income of $311 million and adjusted EBITDA of $2.5 billion in Q3.

Its strategies enabled Sprint to achieve more than $1.6 billion of year-to-date reductions in cost of service and selling, general, and administrative expenses.

“Sprint is turning the corner,” said Sprint CEO Marcelo Claure. “Even with all the promotional offers from our competitors, we were still able to add more postpaid phone customers than both Verizon and AT&T while continuing to grow revenues, take costs out of the business, and improve the network.”

Sprint added 368,000 postpaid connections in the quarter — better than both Verizon and AT&T. This is Sprint’s highest postpaid phone net additions in four years. The company also remained postpaid net port positive for the third quarter in a row and had its highest postpaid phone gross additions in four years.

Sprint said net additions were 577,000, including postpaid additions of 405,000, prepaid losses of 501,000, and wholesale and affiliate net additions of 673,000.

Sprint cut costs

Sprint made progress on growing revenues and improving the cost structure of the business. Total net operating revenues of $8.5 billion grew by $442 million, or more than 5 percent, and cost of service and selling, general and administrative expenses declined by nearly $500 million, bringing the year-to-date cost reduction to more than $1.6 billion.

The company has modified the terms of its technology vendor agreements for service and repair program on Jan. 1, 2017, which are expected to be accretive to adjusted EBITDA by approximately $25 million to $50 million per quarter.

Under the terms of the new agreements, the company will now only record the net margin and therefore expects the reduction to wireless service revenues of approximately $200 million per quarter to be more than offset by a greater reduction in cost of service expenses.

The company remains on track to achieve its goal of a sustainable reduction of $2 billion or more of run-rate operating expenses exiting fiscal year 2016 and plans for further reductions in fiscal year 2017 and beyond.

Sprint made net loss of $479 million in the quarter compared to a net loss of $836 million in the year-ago period, an improvement of $357 million.

Operating income of $311 million in the quarter compared to an operating loss of $197 million in the year-ago period, an improvement of $508 million.

Adjusted EBITDA of $2.5 billion in the quarter compared to $1.9 billion in the year-ago period, an increase of approximately $552 million or 29 percent.

Sprint network gains

Sprint unlocked the value of the largest spectrum holdings in the U.S. by densifying and optimizing its network to provide customers the best experience.

The Sprint LTE Plus network, which includes technologies such as antenna beamforming and two-channel carrier aggregation, is now available in more than 250 markets, with three-channel carrier aggregation deployed in more than 100 of those markets.

Sprint also recently announced HPUE technology to extend the coverage of its 2.5GHz spectrum by up to 30 percent to nearly match its mid-band 1.9GHz spectrum performance on capable devices, including indoors where the majority of wireless traffic is generated.