Management Accounting

Big Write-Down Tarnishes Good Quarter for Sprint

The value of the company's trade name fell off by $1.9 billion.
Katie Kuehner-HebertFebruary 6, 2015
Big Write-Down Tarnishes Good Quarter for Sprint

Sprint’s net operating revenue for its third fiscal quarter fell less than expected due to higher sales, but the company also reported Thursday a $2.1 billion write-down, mostly the result of a reduction in the value of the Sprint trade name.

The company said its net operating revenue for the quarter ended Dec. 31 fell 1.97% from a year ago, to $8.97 billion, better than the consensus estimate of $8.68 billion. The non-cash charge $1.9 billion for the trade name and roughly $200 million to reduce the carrying value of wireline network assets.

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However, Sprint added nearly 1 million platform connections, “as customers responded positively to the company’s new value proposition,” Sprint said in a pres release.

Sprint logo“We are pleased with the growth in sales in the quarter and the improving quality of our customer base as we begin our turnaround plan,” Sprint chief executive Marcelo Claure said in the press release. “However, we acknowledge there is a long way to go to reach our goals, including lowering our postpaid churn rates to competitive levels. Our network performance continues to improve, and we are now focused on a strategy that will unlock the true potential of our spectrum assets. I am confident that we have the right plan in place to be successful.”

Postpaid churn, or the rate of customer defections, rose to 2.3% from a year ago.

A Wall Street Journal article Thursday said that it could be some time before SoftBank’s $22 billion bet on Sprint “pays off.” The Japanese technology company bought Sprint in 2013 to “shake up the business and steal customers” and hired Claure in August to get the company back on track, the WSJ wrote. However, Sprint still lags behind its competitors.

“It’s fair to say that the investment has performed at a less attractive rate of return than they would have expected,” Claure told the WSJ. “This is a turnaround and it takes time. The trajectory has reversed.”

In a separate press release Thursday, Sprint announced that as part of RadioShack’s recent bankruptcy filing, Sprint and General Wireless Inc., a subsidiary of Standard General LP, RadioShack’s largest shareholder, have struck a deal allowing Sprint to add about 1,750 branded stores.

The proposed transaction is part of the sale of a portion of RadioShack’s assets and assignment of certain leases to General Wireless, the company said. Once the deal is finalized and approved by the bankruptcy court, Sprint and General Wireless would establish co-branded stores that would exclusively sell Sprint mobile devices as well as RadioShack products, services and accessories.

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