Earlier this year, Sprint revealed a rather drastic plan to pay off debt, garner some free cash, and improve their financial situation. To put it quite simply, they were planning on selling off some of their spectrum and network assets like towers and nodes, then leasing that equipment back to use until they were ready to either buy it back or replace it. The gutsy move has thus far proven to be a good call; The Now Network has already managed to scrounge up a couple billion, and their network capital expenditure for the year took an upswing as a result, just in time for the year-end reports that shareholders will doubtlessly be poring over while planning things out.
The original plan, drafted up earlier in the year, was aimed at raising about $3.5 billion. That may seem like chump change in an arena where network capex for a single year can get into the double digit billions, but for Sprint, it was more than enough to push them back into the black and give them the free cash flow they needed to build up their network to compete with the big guys. After the dust settled, they even hired Paul Marcarelli of Verizon commercial fame to brag about how reliable and speedy their network was becoming. Sprint CFO Tarek Robbiati confirmed at a recent investor conference that Sprint will be doubling up on the plan, and shooting for another $3.5 billion in cash flow.
According to Robbiati, the Now Network plans to use much of the capital to pay down debt even further, driving down interest rates and payback time frames to lower the overall cost of the debt. Depending on how that goes, it’s highly likely that some of it will be put to use for network buildout in 2017, when overall carrier capex is expected to jump across the board. Some fairly decent numbers for Sprint’s Q3 contrast sharply to worries among shareholders that this leaseback plan may not work as intended, leaving Sprint both financially unstable, and destitute of network resources. The first half of the gamble seems to have paid off, and Robbiati is confident that the second half will be equally worthwhile.