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Worst of the Week: Is it make or break time for Sprint?

WOTW looks at the latest creative financial move from Sprint, and wonders if there is maybe a Central American firm that can help

Hello! And welcome to our Friday column, Worst of the Week. There’s a lot of nutty stuff that goes on in this industry, so this column is a chance for us at to rant and rave about whatever rubs us the wrong way. We hope you enjoy it!

And without further ado:

The questionable financial dealings of wealthy individuals dominated the news cycle this week, including general news tied to a firm based in Panama and a little closer to home with financial news from Sprint.

The Central America-based news was nothing really more than a small peek into how the world’s wealthiest and most powerful people remain the world’s wealthiest and most powerful people regardless of what they may demand the rest of us do. Yawn.

In the telecom space, Sprint did its own bit of financial maneuvering, announcing plans to sell $3 billion worth of network equipment to a newly created entity that will then use that equipment as collateral to convince some deep-pocketed investors to loan it $2.2 billion it will then loan back to Sprint so Sprint can pay other investors it had previously convinced to loan it money. Hmmmm, what does that remind me of?

Ah yes.

Sprint’s news was not really unexpected as the carrier and parent SoftBank said earlier this year they planned the move, but it’s still a bit shocking the depths in which Sprint is being forced to go in order to maintain some sense of financial stability. I mean, just read the words used by Sprint to describe the Network LeaseCo entity: “several bankruptcy remote entities.” I would think at this point in the game the last word Sprint want’s to be associated with is “bankruptcy.”

This network equipment move followed Sprint’s formation last year of its Mobile Leasing Solutions division that took on the burden of device-leasing debt it has since used to loan Sprint more than $1 billion.

As already mentioned, I have very little to no understanding of high finance so I can only assume all of the people in charge over there at Sprint making these decisions know what they are doing. But, then again, these are also the people that have been in charge over at Sprint – some for longer periods of time than others – which is now in a position where it’s having to borrow money from itself to payback loans.

What I can glean from the move is that Sprint basically thinks it just needs a few billion more dollars to turn its ship around, and why not tap into assets it already owns to generate that cash. I guess you can say the move shows Sprint’s executive team has a lot of confidence in its future, otherwise why would it do something so risky. It’s not like Sprint is being run by billionaires who have bet their next house payment on Sprint’s survival.

I think we can look at Sprint’s operations over the past couple of years and see that perhaps in some corners the carrier is indeed beginning to stabilize operations. Sure, it may be sacrificing revenues in the name of connection growth, but all carriers have been doing that to some extent.

However, Sprint’s rivals remain as aggressive as ever, and for Sprint to begin to at least be talked about in the same breath as those carriers in terms of service quality will require untold billions of dollars for both network improvements and marketing efforts to tout those network improvements. This all while still trying to scrounge for trillions of pennies in order to keep the lights on.

Looking back through comments from Sprint over the past decade brought up numerous plans to invest a couple of billion here and then a couple of billion there in moves to improve operations. And perhaps indeed there have been improvements made and if those investments hadn’t been made perhaps Sprint would be in an even more difficult position today. But, it’s sort of hard to imagine Sprint being in any worse of a financial or operational position than what it’s in today.

I am also for the most part trying to suppress legitimate comments made by people much smarter than myself that Sprint is much closer to the precipice of going under than it is of becoming the next T-Mobile US. I always fall back to the belief that Sprint’s spectrum portfolio is worth multiples of where Sprint’s current market cap sits, thus it still has a significant runway in terms of financing options. And so far Sprint has yet to tap into those resources, though in connection with this week’s equipment dealings, the carrier has said spectrum could be part of those plans in the future.

As current Sprint CFO Tarek Robbiati explained this week: “This transaction is an important first step in addressing upcoming debt maturities and allows us to stay focused on our corporate transformation, which involves growing top line revenues and aggressively taking costs out of the business to improve operating cash flows.”

If selling off network assets at a discount is a “first step,” I hate to see where that second or third step will lead.

I guess as long as Sprint is just selling off network equipment, but not it’s spectrum, it’s still at least a few steps away from the edge. However, this week’s move is not expected to be the last in terms of creative ways Sprint will generate money today to pay off debts due tomorrow.

Not that I am in any position to provide Sprint with advice, but I hear there is an interesting firm based in Central America that also has some creative ways to generate cash.

Thanks for checking out this week’s column. Here’s a quick extra to get you through the weekend:

–I somehow missed England’s recent Gadget Show Live 2016 event, in which I assume live gadgets were shown. Most disappointedly, I also missed the chance to take up an offer from the folks at Brewie to check out their beer robot.

While it seems the “robot” is more of just an automated process in which to brew beer, it’s not hard to imagine that at some point in the sampling process good times could have been had.

I welcome your comments. Please send me an e-mail at [email protected].

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