Sprint CEO ready ‘to start making choices’ as it records profit

Alan Burkitt-Gray
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Marcelo Claure drops hints as Sprint makes first profit in three years – when it was last contemplating a merger

Merger rumours have revived after Sprint reported its first profitable quarter for three years, as well as the fourth consecutive quarter of revenue growth.

The company said net profit was $206 million in the first quarter on revenues of $8.2 billion. Adjusted EBITDA was $2.9 billion, the highest in nearly 10 years.

“Sprint reached an important milestone this quarter by returning to profitability for the first time in three years,” said CEO Marcelo Claure. “This represents the progress of a turnaround journey that has delivered improvements in postpaid phone and prepaid customer growth, a return to top-line growth, and a significantly transformed cost structure.”

The company also reported 88,000 postpaid phone net additions, its eighth consecutive quarter of net additions. It reported nearly $370 million of combined year-over-year reductions in cost of services and administrative expenses in the quarter, bringing the total reduction during the last nine quarters to nearly $4 billion.

The three-year period since the last profitable quarter is also three years since the company’s major shareholder, SoftBank, ousted previous CEO Dan Hesse in the wake of a failed attempt to merge with T-Mobile US. Hesse had advocated a merger with the Deutsche Telekom subsidiary as a way of creating a powerful rival to AT&T and Verizon in the US mobile market: all three would have roughly equal market shares.

But that attempt fell before it was even formally proposed, thanks to opposition from Congressional supporters of the big two.

Now it is believed that Sprint’s chairman, Masayoshi Son, CEO of SoftBank, wants to do a deal with cable operator Charter Communications – a deal that may not be a formal merger. The company is also believed to be revisiting the idea of a T-Mobile deal. Comcast, a cable rival of Charter, has also been mentioned.

Claure hinted during a conference call after the first quarter results: “We’ve had enough conversations to start making choices soon.” But he did not elaborate on what those choices were. “We should be able to strike a deal with one of the different players,” he said.

In August 2014 Hesse was dropping similar hints about T-Mobile. Those talks, if there were talks, foundered. Nothing has yet been announced.