Sprint Corp (NYSE: S) reported mixed fourth-quarter results, with what one analyst called “better than feared” earnings, but the company continued to reinforce the Street’s impression that it’s just hanging on until it can complete its pending $26-billion merger with T-Mobile Us Inc (NASDAQ: TMUS). Sprint’s $2.2-billion quarterly loss, falling subscriber totals and “dire” tone about the future on its earnings conference call weren’t doing anything to calm investors. The stock dropped more than 3 percent Wednesday, though the sell-side reaction was more measured. Sprint’s quarterly wireless revenue and EBITDA came in ahead of Street estimates, but postpaid phones and average revenue per user were below expectations for the smallest nationwide cell service carrier. The Analysts Guggenheim’s Mike McCormack maintained a Neutral rating on Sprint with a $6 target price. Wells Fargo’s Jennifer Fritzsche maintained a Market Perform rating on Sprint with a $6 price target. RBC Capital Markets analyst Jonathan Atkin maintained a Sector Perform rating on Sprint with a $6 price target. The Takeaways Guggenheim’s McCormack said the company’s call “painted a rather dire situation” on both some current metrics as well as a potential scenario should its T-Mobile merger — announced more than a year ago — not go through. “We doubt regulators will have a sympathetic ear for Sprint's organic woes,” the analyst said in a Wednesday note. “And T-Mobile investors may begin to question the logic of consummating the proposed transaction.” Wells Fargo’s Fritzsche told investors that Sprint’s fourth-quarter print was “better than feared,” but said the company was clear that without added scale of the merger it would be “very difficult for it to compete effectively vs. the other national competitors.” Until then, Sprint is doing what it can, she said. “We believe S is focused on what is in its control right now, which is building a spectrum-rich 5G network and managing its liquidity as it waits for formal ruling on the (T-Mobile) merger." Any analysis on the fundamentals may not get much attention on the Street anyway, said RBC’s Atkin. “Investor focus remains squarely on the announced combination with T-Mobile and, in the near term, we expect shares to trade on deal news flow/dynamics rather than on fundamentals,” the analyst said in a Wednesday note. Price Action Sprint shares were down 3.8 percent at $5.56 at the time of publication Wednesday. Related Links Raymond James Downgrades Sprint, Cites T-Mobile Uncertainty Sprint, T-Mobile Fall Amid Report DoJ May Not Approve Merger Photo by Chris Potter via Wikimedia.<doc-sep>Bloomberg (Bloomberg) -- Credit Suisse Group AG executives ignored warnings from colleagues about troubled steel tycoon Sanjeev Gupta as they channeled $1.2 billion of client funds to his businesses, according to people familiar with the matter.Bankers in Credit Suisse’s commodity trade-finance unit blacklisted Gupta’s Liberty Commodities Ltd. in 2016 because they suspected some of its deals weren’t legitimate, the people said. When they learned about two years later that the bank was lending to his companies through a suite of investment funds, which eventually grew to $10 billion, they flagged their worries to leaders in compliance and the division that housed the loans, one of the people said.The disclosure that Credit Suisse may have put clients at risk despite internal concerns over Gupta’s businesses adds a new twist to the debacle stemming from the March implosion of Greensill Capital, the finance firm at the center of the three-way relationship.Investigations, LawsuitsThe U.K. Serious Fraud Office is now investigating Gupta’s group of companies for suspected fraud, including in its financing deals with Greensill, according to a May 14 statement. Credit Suisse has sued to force Gupta’s Liberty Commodities into insolvency and has since shut the funds that made the loans and launched an internal investigation. Investors are staring at losses as the bank confronts embarrassing lawsuits.“We are currently focusing our efforts on recovering our investors’ money,” Will Bowen, a spokesman for Credit Suisse in London, said in an emailed statement, adding that the bank’s internal probe will focus on “all of the issues” linked to the funds. “We are committed to learning the lessons and will share the relevant lessons learnt at the appropriate time.”Andrew Mitchell, a spokesman for the Gupta Family Group Alliance, or GFG Alliance, a collective of businesses linked to Gupta including Liberty Commodities, denied any wrongdoing.The Greensill saga represents just one of the two disasters that rocked Credit Suisse in the first half of 2021. Since Greensill began unraveling, the bank has announced a $5.5 billion hit from the blowup at Archegos Capital Management.ApologiesFormer Chairman Urs Rohner apologized to shareholders and his successor, Antonio Horta-Osorio, who arrived at the end of April, has promised a sweeping strategy review.Chief Executive Officer Thomas Gottstein, who was head of the division that oversaw trade finance, wasn’t aware of the internal concerns about Gupta that had prompted the bank to cut him off, according to a person familiar with the matter.Employees at the trade-finance unit, which lends money for the buying and selling of commodities, cut ties with Gupta in 2016 after becoming skeptical toward his Liberty Commodities, the people said. They distrusted the documents the company provided, triggering doubts about its transactions, they said. In one example reported by Bloomberg, the company had presented another bank with what seemed to be duplicate shipping receipts. A spokesman for Gupta has denied any wrongdoing.Banking TiesLiberty Commodities pledged assets to Credit Suisse as security for borrowings in 2013 but by early 2016, all such commitments had been extinguished, indicating that the financing relationship had ceased, U.K. Companies House filings show. And while Gupta’s company listed the Swiss bank as one of its lenders in its 2014 annual report, it didn’t in the following year’s report, which is dated May 2016, according to the filings.Their counterparts at other banks, including Macquarie Group Ltd. and Sberbank PJSC, halted trading with Liberty Commodities around the same time because of similar concerns; Goldman Sachs Group Inc. also stopped in 2016, Bloomberg has reported.Nevertheless, executives at Credit Suisse’s asset-management division -- which creates investment products for clients and charges a fee for overseeing them -- began arranging a suite of funds focused on supply-chain finance in 2017. The entities bought securitized loans packaged by Greensill, a firm created by Australian businessman Lex Greensill. Much of the debts were linked to Gupta’s businesses.WarningsOfficials at the commodity trade-finance unit were concerned when they found out about the funds’ links to Gupta and took their fears to Thomas Grotzer, general counsel for the bank’s Swiss division. They also warned Luc Mathys and Lukas Haas, the bankers who helped oversee the trades at the asset-management unit.Grotzer was promoted last month to interim global head of compliance at Credit Suisse. He didn’t respond to requests for comment. Mathys, head of fixed-income at the asset-management division, and Haas, a portfolio manager, were put on temporary leave in March. Neither responded to requests for comment.The bank pushed ahead with the funds and marketed them to investors as being made up of short-term debt secured on invoices, assets considered so safe that Credit Suisse gave the largest vehicle its lowest rating for risk. Yet part of the loans were linked to mere possible future revenues.Other parts of the bank continued working with Gupta as well. Credit Suisse’s investment bankers were due to lead an initial public offering for Liberty’s U.S. steel arm, which was ultimately pulled, according to a statement from the company. Gupta also announced that the Swiss bank would finance his planned acquisition of Thyssenkrupp AG’s steel unit, which fell apart earlier this year.Credit Suisse has so far recouped about $5.9 billion of the $10 billion in these supply-chain funds, but it remains unclear how much will be returned ultimately to investors. Loans to Gupta’s businesses are among a batch of debts that are the “principal sources of valuation uncertainty,” the bank said earlier this month.Liberty Commodities’s external legal advisors investigated “alleged rumors concerning the paperwork” it used in 2019, according to Mitchell, the spokesman for GFG Alliance. They found no evidence to substantiate the rumors, nor was the company “ever subject to further complaints or proceedings,” he said.“LCL has ongoing banking relationships with separate financial institutions,” Mitchell said, referring to Liberty Commodities. “The trade-finance market has been hugely challenging for all but the very largest commodities traders in recent years. Nevertheless, no financial institution has been left out of pocket as a result of lending money to LCL. On the contrary, they have received substantial commercial returns.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.<doc-sep>Lynn La/CNET As Sprint's pending $26 billion merger with T-Mobile continues to face regulatory scrutiny, the nation's smallest nationwide carrier continues to chug along. Just how much longer it'll be able to do so independently remains a growing concern. Sprint's fiscal fourth-quarter results aren't going to quell those questions. On Tuesday, the company reported a loss of $2.2 billion. Total subscribers fell by 8,000 for the quarter, down from a net addition of 48,000 subscribers in the third quarter. The company added 169,000 devices in the quarter, though like other carriers it relied on 358,000 "data" devices such as tablets and wearables (mostly wearables) to offset losses of 189,000 phone users. Sprint closed its fiscal 2018 with just under 54.5 million subscribers, down from slightly over 54.6 million users for its fiscal 2017. Total revenue for the quarter was $8.44 billion, higher than the $8.21 billion analysts surveyed by Yahoo Finance expected. Shares of Sprint were down over 2.7%, to $5.63, in after-hours trading. "Sprint delivered on its plan for fiscal 2018, as we met all of our financial guidance for the year," Sprint CEO Michel Combes said in a statement. "While we've made progress, there are certainly continued challenges to address, which will continue to put pressure on our service revenue and retail customer growth." The results come as Sprint awaits the fate of its pending merger with T-Mobile, which continues to hang in the air as the two companies press for approval. They argue that a combination would create a stronger No. 3 player to compete against AT&T and Verizon, and help supercharge their combined 5G rollout plans. Since announcing its merger ambitions with T-Mobile last April, Sprint has also argued that it wouldn't be able to survive long-term without finding a partner. In January the company posted a fiscal third-quarter loss of $141 million. In an earnings call with investors, Combes stressed the need for the merger to better compete with AT&T and Verizon on 5G. Sprint has long been known for its aggressive offers, most recently offering those interested in trying its network the ability to do so risk-free for 30 days. If at the end of the month they aren't satisfied, they can leave Sprint and have all costs, fees and service charges fully refunded. Though these promotions have been good at attracting attention and luring in prospective customers, making such aggressive moves does come at a high cost, particularly if the customers bolt at the end of the promotions. In addition to the challenge of bringing in customers, the company also now has to deal with the costs of building and rolling out next-generation 5G networks to compete with AT&T, Verizon and T-Mobile. Sprint has already announced plans to turn on 5G in 9 cities before the end of the first half of 2019, including in Chicago, Atlanta, Dallas and Kansas City this month. Though it has announced its first devices for its new network -- the LG V50 ThinQ 5G and Samsung Galaxy S10 5G phones and the HTC 5G Hub hotspot -- it has yet to reveal exactly when the network will be turned on or how much the 5G devices and services will cost. In its earnings release the company said those first four cities will receive 5G in the "coming weeks," with Houston, Los Angeles, New York City, Phoenix and Washington, DC, getting the next generation network "by the end of June."<doc-sep>
Text size Sprint stock was falling on Wednesday, following the wireless carrier’s fiscal fourth-quarter report, which missed bottom-line estimates and may not do much to sell T-Mobile shareholders on the two carriers’ merger plans. The Back Story. Once upon a time, Sprint (ticker: S) and T-Mobile (TMUS) announced that they were going to merge. That was a little over a year ago, in April 2018, but it seems like a tale as old as time at this point. The deal is taking far longer than hoped to come to fruition, leading to investor worries about its prospects, especially on reports that government regulators are looking askance at its antitrust profile. Still, Sprint managed to gain on its last earnings report in January, even if some think that T-Mobile remains the better bet, deal or no deal. What’s New. On Wednesday, Sprint said it lost 53 cents a share on revenue of $8.44 billion, while analysts were looking for the company to break even on revenue of $8.19 billion. It notched an operating loss of $1.7 billion, and adjusted earnings before interest, taxes, depreciation, and amortization of $3.1 billion. Editor's Choice Postpaid net additions (in which subscribers pay after the fact, as opposed to ahead of time) were 169,000 in the quarter, helped by data device net additions of 358,000, offset by phone net losses of 189,000; the latter was the steepest decline since 2015, and more than triple what some analysts were expecting. “While we’ve made progress, there are certainly continued challenges to address, which will continue to put pressure on our service revenue and retail customer growth,” the company said. Looking Forward. Investors may be unhappy with the loss of subscribers, but one might argue that the disappointing report is actually good news. Losing money to get better treatment from the government is a common tactic, and in Sprint’s case, the company has argued that its poor performance is evidence that it needs to merge with T-Mobile to survive, not to form a mega carrier that would jack up prices for consumers. So why are the shares still down? Even if bad news is good news in terms of the company’s rhetoric for the deal, investors may be worried that it just might stay bad news if a merger doesn’t happen. And there is reason to believe that Sprint’s argument may not resonate with one important base: T-Mobile investors. As Guggenheim analyst Mike McCormack writes, that while being “cognizant of the regulatory backdrop, the tone was framed quite negatively. From roaming agreements to address coverage issues to the expected financial impact in a go-it-alone scenario, the call painted a rather dire situation.” That might have been strategic on Sprint’s part, to play up its poor position and make its merger seem less threatening. Yet McCormack said he doubts “regulators will have a sympathetic ear for Sprint's organic woes, and T-Mobile investors may begin to question the logic of consummating the proposed transaction.” Sprint was down 2.6% to $5.64 Wednesday morning. T-Mobile shares were off 1.6% to $72.79. The S&P 500 was little changed. Write to Teresa Rivas at teresa.rivas@barrons.com