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Sprint CEO: 'Lower hanging fruit' pruned from cost structure


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Sprint CEO: 'Lower hanging fruit' pruned from cost structure

Sprint Corp.CEO Marcelo Claure believes the company is heading in the right direction as itcontinues to trim expenses and to add postpaid customers.

Sprint is in the middle of a multiyear plan to transform itsbusiness and lower its cost structure. The company realized a $1.3 billionreduction in cost of services and selling, general and administrative expensesin fiscal year 2015; and looking forward, Sprint expects a sustainablereduction of $2 billion or more of run rate operating expenses exiting fiscalyear 2016.

"We are determined to basically continue to take costsout of the business," Claure said during a May 3 earnings conference call,adding that thus far, the company had succeeded in pruning the "lowerhanging fruit."

In fourth quarter of Sprint's fiscal 2015, total netadditions reached 447,000, including postpaid net additions of 56,000, prepaidnet losses of 264,000, and wholesale and affiliate net additions of 655,000.Postpaid phone net additions totaled 22,000 for the quarter, a figure thatSprint noted was higherthan results fromVerizon Communications Inc.and AT&T Inc. forthe first time on record. For the full fiscal year, the company reportedpostpaid net additions of more than 1.2 million, including phone net additionsof 438,000. Fiscal year 2015 Sprint platform postpaid churn of 1.61% and phonechurn of 1.52% both improved by roughly 50 basis points year over year and bothrepresented the best rates in company history.

Claure said on the call that the lower churn rates were dueto continuing improvements in the company's network and to Sprint's decision tode-emphasize its prepaid offerings in favor of postpaid. He added that Sprint'sresults were especially impressive given how competitive the mobile market isright now. "You have AT&T and Verizon offering $650 for customers toswitch, which means there's no more contract," he said, adding that everycustomer can switch providers at any time. "The market is competitive asit's ever been."

Sprint on May 3 reported a net loss of $554 million, or 14cents per share, in the fiscal fourth quarter, compared with a net loss of $224million, or 6 cents per share, in the year-ago period. The companyattributed the year-over-year increase in its net loss to ongoingtransformation program costs, split between operating expenses and capitalexpenditures. Adjusting for one-time costs, the net loss per share would havebeen relatively flat year over year.

For the full fiscal year, the company reported a net loss of$2 billion, or 50 cents per share, compared to a net loss of about $3.35 billion,or 85 cents per share, in the prior year.

The S&P Capital IQ GAAP EPS consensus estimate for thejust-ended quarter was a loss of 14 cents; the normalized EPS consensusestimate was a 13-cent loss. The GAAP EPS consensus estimate forfiscal 2015 was 46 cents; the normalized EPS estimate was 40 cents.

Total net operating revenues for the quarter declined 3%year over year to $8.07 billion. For the full fiscal year, net operatingrevenues were down 7% year over year to $32.2 billion. Adjusted EBITDA for thequarter was $2.13 billion, up from $1.70 billion in the year-ago period. Forthe full year, adjusted EBITDA rose 36% year over year to $8.1 billion.

Looking ahead, Sprint expects fiscal year 2016 adjustedEBITDA of $9.5 billion to $10 billion and operating income of $1 billion to$1.5 billion. The company expects capital expenditures of roughly $3 billionfor the year.