Sprint’s Weekly Notes: Earnings and Clearwire Deal Extension

Last week, Sprint (NYSE:S) reported mixed Q3 results, in which earnings were generally good from a financial standpoint as revenue and EBITDA grew 2% and 5% year-over-year, respectively. However, the company’s capital expenditures have continued to escalate as it focuses on its network modernization project and improving data capacity in advance of the Apple (NASDAQ:AAPL) iPhone launch. During the earnings, Sprint also threw some light on its relationship with ClearWire (NYSE:CLWR) and mentioned that the company has come to an agreement with Clearwire in order to help roll out Clearwire’s own LTE network that Sprint’s subscribers will be able to use. This is something we discussed in detail in our earlier note titled With iPhone Sprint Has No More Excuses, Fourth Quarter is Critical.

See our complete analysis for Sprint stock here

Update on Sprint-Clearwire deal

Bloomberg came out with a report last week that Sprint and Clearwire are near an agreement to extend their existing network-sharing agreement for three to five years. ^[1] The report also suggested that the deal would allow Sprint to use Clearwire’s network to provide services to its customers after the current pact expires at the end of 2012, and that the price Sprint pays for Clearwire to handle its traffic is likely to fall.

We believe if this deal does go through, it will be a win-win situation for both companies. The negotiated price will help Sprint lower the cost involved in carrying the data over network, thereby boosting its margins. Clearwire would benefit from optimum utilization of the excess spectrum that it holds.

We are currently revising our price estimate which should be reflected on our site later today.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Sprint Said Near Deal With Clearwire for New Long-Term Pact, Bloomberg citing three people familiar with the matter, October 29th, 2011 [↩]