Sprint Decides to Cut Capital Spending by 36 Percent Amid Mobile Network Overhaul

Sprint, the nation’s leading network carrier is reducing their capital spending by 36 percent this year. The corporation believes that this step can help conserve cash and improve its wireless network and also help add consumers in this increasingly competitive market.     

The operator, which is mired in debt and losses, is planning to cut spending to $3 billion from $4.7 billion in fiscal 2015. Though Sprint’s Chief Executive Officer Marcelo Claure has said that their mobile network is state-of-art enough to lure customers from other major network carriers, including Verizon Communications Inc., AT&T Inc., and T-Mobile US Inc., the analysts are taking the move as a spending squeeze which can leave the carrier behind its rivals. 

“The punch line here is that we are building our network, we are not delaying any spending and, more importantly, we are building our network way smarter than we did in the past,” Claure said. Sprint, now the No. 4 carrier, faces the challenge of cutting $2 billion in annual costs, while raising cash and attracting new subscribers to a faster network. 

In a break from convention, Sprint is looking for alternatives to cut 20-year agreements with tower companies, and has decided to put small antennas & transceivers on building rooftops & utility poles in some areas to improve signal reception. 

“This is largely a deferral of capital spending from 2016 to 2017, again, a move towards sustainability rather than growth,” Craig Moffett, an analyst at MoffettNathanson LLC said in a note Tuesday. Moffett, who has a sell rating on the stock, described Sprint as “spectrum-rich but network poor.” The carrier’s plan to make the most use out of a vast trove of 2.5 gigahertz spectrum is “taking longer than expected and will mostly come in 2017 rather than 2016,” he wrote.

Overall, the cost cuts helped make up for a lower amount of subscriber additions than estimated. Also, the sources say, “Adjusted earnings before interest, depreciation and amortization for the fiscal fourth quarter, which ended March 31, was $2.16 billion, compared with a $2.02 billion average of estimates compiled by Bloomberg. The company cut $1.3 billion in expenses in the fiscal year”.