Sprint's turnaround boosts SoftBank to 71% jump in profit

SoftBank CEO Masayoshi Son

SoftBank’s profit rocketed 71% in the latest quarter thanks largely to Sprint’s progress in regaining its financial footing.

The Japanese telecom posted a $2.63 billion profit during the quarter, up from $1.54 billion during the same period a year ago and ahead of analysts’ estimates. Sprint’s turnaround contributed to half of SoftBank’s growth last quarter, The Wall Street Journal reported.

The quarterly earnings highlight how effectively Sprint has slashed costs over the last two years. Sprint weighed down shares of its parent company in the first half of 2016 as it struggled to shore up its bottom line. It reported a net loss of $554 million during the first quarter of 2016, more than doubling the $224 million loss it recorded during the same period in 2015.

Sprint’s net operating revenues came in at $8.5 billion during the final quarter of 2016, demonstrating more than 5% year-over-year growth, and its net loss of $479 million was a marked improvement over the $836 million net loss it recorded a year ago. The postpaid phone net additions were Sprint’s highest in four years, marking the ninth consecutive quarter of year-over-year growth, but its 405,000 overall postpaid adds was shy of analysts’ estimates by 2.4% and was down more than 19% year-over-year, MoffettNathanson analysts noted.

Some industry insiders are still uncertain about Sprint’s fate, however. Donald Trump’s Election Day win has stoked speculation the carrier could merge with T-Mobile in a move that would significantly consolidate the U.S. market.  

SoftBank CEO gave little indication what his plans are for Sprint, saying “we may buy … we may sell,” according to Jennifer Fritzsche of Wells Fargo Securities. But the Japanese firm is unlikely to cede control of its U.S. carrier given its recent traction, Fritzsche said.

“We don’t know the answer but it is hard for us to see SoftBank taking a minority position in a combined entity given the momentum in Sprint is only just being seen, in our view (even in a period of limited capital spending,” Fritzsche wrote in a note to investors. “Additionally, we continue to believe in any negotiations, Sprint would be in a position of strength given the significant spectrum asset value to any potential combination.”

Sprint shares were up 3.6% by mid-day Wednesday.