Sprint's (NYSE:S) struggles are beginning to take a toll on parent company SoftBank.
Shares of the Japanese company have dropped 18 percent over a four-day slide, BloombergBusiness reported, while Sprint's stock is at a two-year low over concerns that the carrier may not be able to meet its financial obligations. SoftBank's market capitalization has fallen to $46.7 billion, substantially below the stake in Alibaba that it claims is worth $55 billion.
The slide followed reports that Sprint has finalized plans for a dramatic network overhaul and will relocate much of its equipment from space leased from Crown Castle and American Tower to more affordable, government-owned space. Sprint also plans to transition away from using fiber-optic cables owned by AT&T (NYSE: T) and Verizon (NYSE: VZ) in favor of using microwave technology to link its cell towers to telecom networks.
Sprint hopes to save $1 billion through the moves, which could begin as early as June. But analysts have expressed doubts about the drastic strategy, questioning whether a transition could occur without devastating network hiccups. Sprint is all too familiar with such occurrences, having suffered through troubles with its Network Vision transition.
And Sprint's reported network strategy – which the carrier has yet to publicly address – isn't the only concern for investors. The company last month took a $150 million charge for expenses related to layoffs that are expected to continue through January, and it's likely to face stingy investors and much higher costs when refinancing due to waning interest in the junk bond market.
Moody's Investors Service downgraded its credit ratings on Sprint in September amid growing concerns about the company's ability to reverse its financial slide. SoftBank has taken on roughly $100 billion in debt over Sprint's financial woes, BloombergBusiness said.
Moody's said at the time that it was "concerned about the ability of Sprint to refinance its large upcoming debt maturities absent a much stronger commitment from SoftBank to the long-term strategic importance of SoftBank's overall plans." SoftBank CEO and Sprint Chairman Masayoshi Son has repeatedly vowed to turn around Sprint, but he'll likely have to place even bigger bets to do so.
- see this BloombergBusiness report
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