Sprint's trick to making money: A year of free of service

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In Tuesday’s pre-market deals Sprint was up 3

(S) - Charter, one of the largest cable companies in the U.S., says it's not interested in buying Sprint, the fourth-largest wireless carrier in the U.S. Sprint, which is unprofitable and has a lot of debt, had proposed an acquisition by Charter, according to published reports.

For as much effort as Sprint has put into its turnaround plans, they still haven't been enough, forcing Claure to look at a variety of options that will buy the company time to keep working on its rebound. In the same period a year ago, it reported a net loss of $302 million, or 8 cents per share. Sprint said it reduced the cost of services and SG&A expenses by almost Dollars 370 million in the quarter and expects another USD 1.3-1.5 billion in net savings over the full fiscal year.

"Analysts see tremendous financial benefits to a Sprint-T-Mobile deal, if regulators would go along". But Sprint's results were largely in line, with most financials beating analysts' expectations while subscriber growth fell a bit shy of consensus estimates. Regulators lifted a ban on merger discussions among telecom companies following the conclusion of an auction of broadcaster airwaves for wireless use in April.

Both Comcast and Charter already have an MVNO deal with Verizon Wireless but are still adamant to explore business opportunities with Sprint as the Overland Park, Kansas-based carrier is understood to be ready to offer them more favorable terms.

Sprint, in a statement released to investors, reported net income of $206 million in the first quarter of 2017, along with operating income of $1.2 billion and an adjusted EBITDA of $2.9 billion.

Sprint blamed the postpaid losses mainly on the tablet segment. "Given that Charter's market cap is more than three times Sprint's, a simple stock-for-stock deal would cut Softbank's ownership stake in the new company to only around 11% to 12%, leaving SoftBank with relatively minimal influence at the combined company".

The company pulled out all the stops this past quarter. The following week, Sprint's pre-paid arm, Virgin Mobile, said it would provide a year of service for $1 - and only sell iPhones. "Unfortunately, it is precisely these distortions that make M&A so hard. The problem is simply Sprint's excessive valuation".

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