Sprint Is Doing Well, T-Mobile Deal or Not

Source: http://www.flickr.com/photos/teubig/

Source: http://www.flickr.com/photos/teubig/

Shares of Sprint (NYSE:S) climbed as much as 7.3 percent in early trading on Tuesday after the telecom company reported strong fourth-quarter and full-year results for 2013. Sprint logged 682,000 total net platform additions in the fourth quarter and closed the year with 53.9 million subscribers, a record high. Post-paid average revenue per user (ARPU) on the Sprint platform increased 1.6 percent to a record $64.07, while prepaid ARPU increased 1.3 percent to $26.26.

CEO Dan Hesse cut to the chase in his comments in the earnings release. “In 2013 Adjusted EBITDA and Sprint platform wireless revenues grew significantly while we made investments to improve network performance and expand 4G LTE to more than 200 million people,” he said.

Adjusted EBITA (earnings before interest, taxes, and amortization) increased nearly 40 percent on the year to $1.15 billion in the fourth quarter “as growth in Sprint platform service revenue, network savings resulting from the Nextel platform shutdown and lower net subsidy expense were partially offset by the loss of Nextel platform revenue and the consolidation of Clearwire’s results,” per the company. Clearwire’s merger deal with Sprint closed in July.

Overall, revenue increased 1.5 percent on the year to $9.14 billion in the fourth quarter, beating the mean analyst of about $8.97 billion. Sprint recorded a loss of 26 cents per share, but the results were still better than expected, beating expectations by about 7 cents. Sprint’s net loss for the quarter narrowed to $1 billion from $1.3 billion in the year-ago period, while operating losses narrowed to $576 million from $738 million.

The big specter hanging over Sprint right now is its proposed merger with T-Mobile US (NYSE:TMUS). Sprint’s investors have jerked the stick up, down, and sideways over the past few days as news surrounding the proposal shifted rapidly from optimism to pessimism — shares closed Monday’s trading session down more than 4 percent after regulators with the U.S. Department of Justice and the Federal Communications Commission voiced their opposition to the deal.

However, Sprint Chairman Masayoshi Son may be unfazed by the regulatory opposition. Sources familiar with the situation have told the Wall Street Journal that he may decide to proceed with the deal. Sprint believes that a merger with T-Mobile is pretty much the only option left to the two companies if they want to compete with the telecom “duopoly” that is Verizon (NYSE:VZ) and AT&T (NYSE:T). A successful merger of Sprint and T-Mobile could create a $57 billion company, not quite in the same league as Verizon at $134.9 billion and AT&T at $170.8 billion, but more competitive nonetheless.