Sprint Surges After It Returns to Profit in First Quarter

Sprint Corp. on Tuesday swung to a quarterly profit for the first time in three years as the No. 4 US wireless carrier slashed costs and added subscribers. "The company delivered almost $370 million of combined year-over-year reductions in cost of services and SG&A expenses in the quarter, bringing the total reduction during the last nine quarters to almost $4 billion".

The No. 4 USA wireless carrier, majority owned by Japan's SoftBank Group Corp, is exploring options including a merger with rival carrier T-Mobile US Inc as well as a tie-up with cable provider Charter Communications Inc.

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Subscribers: Sprint enjoyed its eighth consecutive quarter of postpaid phone net additions, and its total net additions of 61,000 included postpaid net losses of 39,000, prepaid net additions of 35,000, and wholesale and affiliate net adds of 65,000.

"Sprint reached an important milestone this quarter by returning to profitability for the first time in three years", CEO Marcelo Claure said in a statement. Its second-quarter net profit jumped by more than half to $3.87 billion. Next quarter's results will be the real test - is not even a free Sprint service appealing to customers? That said, the firm thinks the company too will benefit from M&A, either as one of the potential near-term targets of SoftBank or if SoftBank were to merge with Sprint and Charter, then as a potential long-term target for Comcast Corporation (NASDAQ: CMCSA). However, the pace of growth has slowed from a year ago when the company reported 173,000 postpaid additions.

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"We have plenty of options, and we've had discussions with a lot of different parties", he said. The corporation added 88,000 new contract subscribers this quarter. Net income of 5 cents per share significantly beat average estimates of a net loss of 1 cent per share, according to Thomson Reuters I/B/E/S.

"We've been going at this since the spectrum auction ended", Claure said. After rallying more than 130% in 2016 in anticipation of a corporate turnaround, as of Monday afternoon Sprint stock was down just a bit year-to-date largely because evidence of that turnaround remained obscured.

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At the time of writing, shares of Sprint were rallying 10.84 percent to $8.85. This comes after The Wall Street Journal said that Charter wasn't interested in Sprint. The deal would entail SoftBank buying the Sprint shares it does not already own, the source said. SoftBank has achieved sizable girth through highly leveraged financing of acquisitions like Alibaba Group Holding Ltd., for which it has achieved outsized returns, and Sprint, on which it has lost billions.