Sprint's Hesse predicts profit in 2014

Sprint Dan Hesse


Sprint Nextel (NYSE:S) CEO Dan Hesse said he thinks the company is on track to turn a profit in 2014 after seven years of losses.

In an interview with Bloomberg, Hesse said the company still has a long way to go, reiterating comments he has made on earnings calls and at investor conferences. Still, he said Sprint will see profit-margin expansion and earnings growth in 2014.

The nation's No. 3 carrier is in the middle of its multi-year, $4 billion Network Vision network modernization plan and is also on the hook for a four-year, $15.5 billion commitment to Apple (NASDAQ:AAPL) to sell the iPhone. Those costs have weighed heavily on both Sprint and investors, though Hesse has noted that both are essentially long-term investments for the company. However, Sprint's stock has surged this year in part on expectations that the company is starting to turn the corner.

"A year ago, management was talking about all the things they needed to do--it was hard to listen to them, they had so little credibility," Scott Dinsdale of KDP Investment Advisors, which owns Sprint bonds, told Bloomberg. "You just held your nose and held the bonds. Now they've gotten to the point where you can see light at the end of the tunnel."

Hesse has said that Sprint is now in the second stage of its turnaround, the investment phase, after going through four years of recovery in which it had to regain customer loyalty and improve its customer service and brand. Following the investment stage Sprint hopes to get back to growth.

By 2014 Sprint's Network Vision project will be concluded and Sprint's LTE network should be fully built out. By then, the Nextel iDEN network will be offline, taking the costs of running that network off Sprint's books (Hesse even said Sprint may eventually drop "Nextel" from its corporate name). Network Vision could also help reduce Sprint's roaming payments to Verizon Wireless (NYSE:VZ). But Sprint may need to pump more funds into its partner Clearwire (NASDAQ:CLWR); Sprint plans to offload some of its traffic onto Clearwire's forthcoming TDD-LTE network.

Still, skepticism remains that Sprint can pull it all off. "There's still a considerable amount of risk in Sprint since they are not quite halfway through the network migration," Dinsdale said. "They are chronic in their disappointments."

For more:
- see this Bloomberg article

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