Sprint Filings

Previous Post: The 10-Q, Part I - The Overview
Previous Post: The 10-Q, Part II - The Balance Sheet
Previous Post: The 10-Q, Part III - Return of the Income Statement
Previous Post:The 10-Q, Part IV - Cash Flow (It's All About the Benjamins)

Well, we've finally come to the part where I pretend like I know what I'm talking about and then I make some vague, open-to-interpretation comments on Sprint's short term and long term future. You know, kind of like Dan Hesse does. My predictions though, hopefully, are reality-based due to my thorough (hey, I looked at it) review of Sprint's 1st Qtr 10-Q statement. So, let's get to it...

Short-Term
Sprint's balance sheet is getting worse and will continue to get worse. By the same token, net income will continue to be negative. Not exactly encouraging. On the positive side, Sprint is generating some positive cash flow. Yet, in both the short and long term, Sprint is going to have to use that cash to pay down maturing debt. I don't see anyway around that. So, cash flow must continue to be positive or Sprint faces a very real risk of going bankrupt (not within a year but relatively soon). Since Sprint is shrinking in terms of revenue they will most likely have to continue to cut costs in order to retain a large positive cash flow...more layoffs, anyone? So, here are my predictions:

• Sprint will lose at least another 1.75 million customers for this year (3rd and 4th qtrs combined)
• More reshuffling of executives (like re-arranging deck chairs on the Titanic)
  
• Cash flow will continue to be positive but will shrink over the next year which will lead to...
• Some limited layoffs (i.e. more outsourcing and/or rebadging)
  

Long-Term (> 1 year but less than 3 years)
It's almost impossible to make any accurate long-term predictions simply due to the unbelievable amount of variables and parameters. Just ask any supporter of anthropogenic global warming. But, that's not going to stop me from making such predictions. So, let me just say, I don't think Sprint is going to go bankrupt but it is a real possibility. In fact, if Sprint is not able to start adding customers on a net basis (or, at the very least, stem the subscriber losses), then they will not be able to meet their debt obligation at some point in the next few years. They have too much maturing debt and they will not be able to get reasonable financing in order to "roll over" that debt. That's not to say Sprint would no longer exist; it just wouldn't exist in its current form. Having said all that - and I'm not sure why - I still remain optimistic that that will not come to pass. So, some predictions:

• Sprint will undertake more "novel" ways to cut costs (similar to the Ericsson outsourcing deal) as they are forced to deal with their ability to stop subscriber losses
  
• Net subscriber losses, though, will eventually stabilize in late 2010
  
• Large growth in pre-paid but continued losses in post-paid (which, on net, will cancel each other out in terms of net subscribers)
  
• Once stabilized, smaller overall revenue due to higher percentage of pre-paid customers
• Sprint will, at some point, be forced to dump WiMax
  

Is Sprint a viable company in the short-term? Yes. Is Sprint a viable company in the long-term? Probably. Even if it is, I think there have been too many poorly-executed strategic decisions to "right the ship" and see any growth in the foreseeable future. Every botched decision - from the merger, to marketing, to IDEN stupidity (sell it? keep it? reduce spending? no, wait, increase spending?), to not pursuing the iPhone, to the woeful impact of Dan's "nukes" - has hampered this company to the point where the best it can hope for right now is remaining in business. It has been said that "hope never abandons you; you abandon it" and Sprint shouldn't abandon it quite yet.*

* Of course, it has also been said that "hope is the worst of evils, for it prolongs the torments of man." But the other quote sounded better.