sprint nextel (nyse: s) - uvacollab product: htc evo 4g a prepaid market leader –11.2 million 5...
TRANSCRIPT
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McIntire Investment InstituteAt the University of Virginia
Sprint Nextel
(NYSE: S)
M c I n t i r e I n v e s t m e n t I n s t i t u t e1
Prepared by Collin Schweiker| 7 October 2010
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Business Overview
Sprint Nextel merger in 2004
Headquartered in Overland Park, KS
Wireless telecommunications provider
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48.2 million customers
3G and 4G service capabilities
Majority stakeholder in Clearwire
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Business Overview
3rd largest wireless network in U.S.
4G vs 3G
Growth of prepaid market
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Boost Mobile, Virgin Mobile,
Assurance Wireless
Google/Clearwire
Wal-Mart/Common Cents
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Long Position Investment Thesis
Market innovator
Positive growth
Cost leadership
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Experienced, driven management
Renewed public image
Industry-leading CE position
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Market Innovator
First-to-market WiMax 4G network
Flagship product: HTC Evo 4G
A prepaid market leader – 11.2 million
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Common Cents pricing structure
Assurance Wireless gov’t program
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Positive Growth
Net gain in subscribers Q2 2010
110,000 contracts, first time in 3 years
Projected growth for rest of the year
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4G expansion into new markets
WiMax coverage for 120 million people
521,000+ new prepaid in 2010
(more than Verizon and AT&T)
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Cost Leadership
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Source http://www.billshrink.com
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Experienced, Driven Management
The Boss: Dan Hesse
Former CEO of AT&T Wireless
Over 30 years in the business
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Customer satisfaction
Brand Recognition
Cash generation
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Renewed Public Image
Poor service � high churn rate
Highest improvement in customer
satisfaction by the 2010 ACSI of any
company two years running
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Six #1 rankings by the 2010 Atlantic-
ACM Business Connectivity and
Wireless Excellence Awards
Double industry standard for green
initiatives
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Industry-leading CE position
$4.28 billion in cash
Liquidity to take full advantage of 4G
roll out
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roll out
Projected 2010 total of $2 billion in
capital expenditures
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Current Stock Information
Share price: $4.65
Market capitalization: $13.74B
P/E: N/A
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P/E: N/A
EPS: -1.04
Cash flow per share: 1.30
P/B Ratios | S: 0.83 | VZ: 2.40 | ATT: 1.59
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Risks
Heavily analyzed firm – difficult to
find an edge
Negative earnings
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Negative earnings
Reputation lag
First to market edge inadequate
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Misperception and potential edge
Bill Shelton, Director of Business Development at Juniper Systems
Sprint: Long-standing reputation for poor phone service and low
customer satisfaction
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Market misperception of the new Hesse-led Sprint by customers
Improved service, cutting edge technology, and AT&T’s worsening
reputation could all lead to fourth quarter sales exceeding analyst
expectations
Unique business position makes valuation difficult
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Potential Catalysts
Deutsche Telekom bid for Sprint Nextel (T-Mobile merger)
Prepaid growth through unlimited plans
Reinforced Google partnership after Verizon iPhone release
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Reinforced Google partnership after Verizon iPhone release
(Clearwire partner)
Sharp increase in net subscribers after fourth quarter 4G release in
new markets
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Conclusion and Recommendation
My pitch hinges on analysts’ underestimation of Sprint’s expected performance and a changing market perception of Sprint’s reputation and service quality.
Sprint offers a faster wireless experience with arguably better
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experience with arguably better hardware for a cheaper price.
Sprint is well managed and has turned the corner from its previous market losses.
I recommend a 3% long position
Disclosure: The analyst is long Sprint