One of the world’s most prominent rating houses, Moody’s, has upgraded its verdict of Sprint. According to the details, Moody’s has kept Sprint’s B3 rating, which means the company remains considered as “speculative grade liquidity.” However, the ratings outlook has been promoted from negative to stable, which reflects Moody’s opinion that Sprint and its parent, SoftBank, are committed to keeping Sprint “a going concern.” In other words, the business is moving towards becoming able to stand on its own two feet without the direct support of SoftBank. Moody’s notes Sprint’s recent efforts to cut costs and add subscribers. Which is in line with the recent developments surrounding SoftBank’s purchase of ARM Holdings, which many market commentators believe shows confidence in Sprint.
Sprint has also conducted a number of corporate deals designed to raise cash against its assets (such as its network) or increase how readily the business can borrow money, which is an important way of funding network development and improvements. Sprint’s internal changes include working towards reducing costs by $2 billion and working with banks and financiers to establish a $2 billion short term bridge facility. These changes have improved the short term outlook out to eighteen months. The carrier has also seen an improvement in revenue and subscriber growth, plus a drop in churn, over the short term. This follows a long, difficult business period during which T-Mobile US overtook Sprint to become America’s third largest carrier. Sprint’s recent results showed an addition of 173,000 net postpay phone customers in Q2 2016, but the business still made a net loss of a little over $300 million. The market is concerned that Sprint’s cost cutting could impact on its ability to maintain its current network.
Moody’s note to investors highlighted that the carrier is in “a fragile state of recovery” as it has stabilized the business and balance sheet, but is yet to become a self-funded business. The carrier needs to maintain a focus on keeping costs under control whilst simultaneously deploying new network technologies. This puts the company in a difficult position of needing to thread the business needle between different needs and requirements. Sprint’s parent, SoftBank, believes in the carrier and the market will likely welcome a strong competitor in Sprint.