Shares of Sprint Nextel Corp. (S) stock surged Monday on positive financial news – the nation’s third-largest wireless carrier has paid off a chunk of debt, and received a subsequent ratings upgrade from an investment bank.
Sprint said it has repaid $1 billion under its $4.5 billion revolving credit facility, leaving it with no outstanding balance. Sprint had $5.9 billion in cash at the end of 2009’s third quarter; its $1.6 billion in borrowing capacity brings total liquidity to $7.5 billion, the company said.
Investors and analysts liked the developments. On Wall Street, Sprint’s stock had jumped more than 10 percent in late-morning trading. And investment bank Credit Suisse edged Sprint’s ratings up a notch, from neutral to outperform with a $6 price target. Analyst Jonathan Chaplin said Sprint is making good progress with its turnaround efforts and will benefit from continued cost-cutting measure, beefed up prepaid sales and better postpaid customer retention. Credit Suisse expects fewer of Sprint’s annual subscribers to defect from the company.
That would be a welcome change from the thousands upon thousands of users who have been canceling their contracts each quarter for the past several years. In the third quarter of this year alone, Sprint lost 801,000 of those valuable subscribers, who agree to annual contracts and tend to spend more on services than their prepaid counterparts. More customers left Sprint in the third quarter than in the previous one; however, the losses were better than a year earlier when 1.3 million users left the company.
In addition to trying to shore up its postpaid base with new smartphones such as the Palm Pre and Palm Pixi, Sprint also is honing its prepaid strategy. The carrier is in the midst of buying Virgin Mobile USA, a move expected to give it access to the millions of consumers who need wireless service but can’t afford or don’t want contracts.
Sprint’s stock price was up 33 cents a little before noon Eastern, at $3.43.
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February 15 2019 @ 14:45:26 UTC