Sprint's stock plunges following LTE strategy conference

Investors and analysts reacted with a mix of disappointment and frustration to Sprint Nextel's (NYSE:S) 4G strategy conference Friday, sending the company's stock down, with one analyst calling Sprint currently "un-investable."

Following the meeting, in which Sprint executives detailed the company's plans to launch LTE service on its 1900 MHz spectrum by mid-2012, Sprint's stock lost more than 20 percent in value. As of mid-morning trading in New York on Monday, the stock was down another 5.8 percent, or 14 cents, to $2.27 per share.

One factor weighing on analysts and investors was Sprint CFO Joe Euteneuer's admission that the company may need more funding to pay for the LTE rollout. Euteneuer said the company plans to spend around $10 billion in 2012 and 2013 on deploying Network Vision and LTE as well as maintaining its legacy wireline and wireless operations. At the same time, he said Sprint will save $10 billion to $11 billion in operating expenses and capital expenditures from 2011 to 2017, including $4 billion from shutting down its iDEN service.

"Liquidity concerns" will probably be an "overhang" for the stock, said Michael Nelson, an analyst at Mizuho Securities. "Management must demonstrate an ability to execute against its strategy before investors give the company the benefit of the doubt," Nelson, who reduced his rating to "neutral" from "buy," wrote in a note to clients Monday.

Analysts at J.P. Morgan Chase, Deutsche Bank, Collins Stewart, Kaufman Bros. and Raymond James also cut their recommendations of Sprint. "We believe Sprint is un-investable until they can provide better clarity on EBITDA, their 4G strategy and their capital structure," BTIG analyst Walter Piecyk wrote in a research note. "We also hope the board listens to the replay of the Q&A to hear what investors thought of the plan they approved."

Credit Suisse analyst Jonathan Chaplin, cut his valuation on the stock due to the higher than expected spending for capital expenditures. "It now appears that Sprint needs to raise $1 billion to $2 billion to have an adequate cushion," he wrote in a research note. "The funding overhang will likely weigh heavily on Sprint's stock until it is resolved."

For more:
- see this Bloomberg article
- see this WSJ blog post (sub. req.)
- see this BTIG blog post (reg. req.)

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