Sprint won’t be able to reach its goal of returning to revenue growth in 2018, predicted BTIG analyst Walter Piecyk in a post titled “Cutting Estimates For Sprint.” Piecyk said BTIG is raising its expectations for Sprint’s postpaid phone churn, lowering its expectations for Sprint’s postpaid phone ARPU and increasing its estimates for Sprint’s capex.
Importantly, BTIG also reduced its predictions for Sprint’s fourth-quarter postpaid phone net customer additions by 110,000, to 220,000.
Many of Piecyk’s figures run counter to those laid out by Sprint’s CFO, Tarek Robbiati. “Robbiati has stated that he expects Sprint to return to revenue growth in 2018, but we think that milestone may be out of the company’s reach this year,” Piecyk wrote (reg. req.). “The difference in our expectations in 2018 relative to the company are likely driven by their expectation of growth in phone gross additions compared to our estimate of <1%. We estimate that post-paid phone gross adds would have to grow by 17.5% in 2018, (compared to the 4.7% growth in 2017) in order to return the company to service revenue growth by Q4. That might be challenging given the company’s plans to increase price and the diminishing marginal impact of steeper and steeper price cuts.”
Indeed, in his post Piecyk took aim at a range of Sprint metrics and strategies, noting that the company has blamed iPhone X shortages for sluggish gross customer additions, “but their competitors have told us that iPhone X supply in Q4 has not differed materially from prior years.”
Piecyk also noted that Sprint executives previously argued the company didn’t need to spend as much as its rivals on its network in order to provide suitable services, a position the company recently has reversed with plans to deploy “a few thousand towers” as it significantly ups spending on its network over the next two years.
That said, Piecyk wrote that he believes Sprint is now on the right course, with plans to invest more in its network and its 2.5 GHz spectrum holdings. “We believe Sprint’s latest plan is the proper one, but it’s simply several years too late, presumably due to its Chairman’s desire to secure a deal with T-Mobile,” he wrote. “Based on press reports, Masa and SoftBank’s board desire for control and a lofty view of relative valuation derailed those efforts. We think a merger also faced long odds with regulators. Conversely, we have believed and stated for some time that enabling the power of the 2.5 GHz spectrum, through investment, would be Sprint’s key to success.”
Merger negotiations between T-Mobile and Sprint collapsed in November, and shortly afterward, SoftBank’s chief executive promised that Sprint would raise its network capex from a low of around $2 billion per year to a high of up to $6 billion per year. The company also inked an MVNO deal with cable company Altice.
Investors also seem to be warming somewhat to Sprint’s latest efforts, sending the company’s value up to around $6 per share during the past month.