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Sprint CFO: Consolidation among smaller players may be necessary

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Sprint CFO: Consolidation among smaller players may be necessary

In the wake of the U.S. presidential election, Sprint Corp. has been the subject of rampant M&A speculation, with analysts suggesting various potential combinations for the company, including merging with T-Mobile US Inc. or a cable operator.

Asked about opportunities for Sprint to inorganically drive scale in a question that alluded to the deal chatter, company CFO Tarek Robbiati said Jan. 31 that Sprint is "first and foremost focused on maximizing shareholder value on a stand-alone basis," and will continue working to attract new customers while reducing operating costs.

He further acknowledged the external speculation without commenting on any specific tie-up possibilities.

"From a policy perspective, it would seem to make sense that over the long term, further consolidation among the smaller players may be necessary to compete with the big two. But it's early days," he said.

Robbiati noted the "common thread" in all of the chatter "is that Sprint has great assets, including the best spectrum portfolio in the U.S."

Beyond spectrum, Sprint CEO Marcelo Claure said one of the company's biggest advantages is the work it has done to densify its network through the deployment of small cells. He pointed to a recent move in New York City where the company deployed "a limited amount" -- roughly 200 -- of small cells, and saw a massive increase in download speeds.

Densification, Claure noted, not only improves speeds but is necessary as the company prepares for the rollout of next-generation 5G technology.

"So our network is better than ever, but what's coming is going to be a lot better," the CEO said.

For its fiscal third quarter of 2016, the company reported 577,000 total net customer additions, including post-paid net additions of 405,000, prepaid net losses of 501,000 and wholesale and affiliate net additions of 673,000.

Sprint reported a net loss of $479 million, or 12 cents per share, for the quarter ended Dec. 31, 2016, compared to a net loss of $836 million, or 21 cents per share, in the year-ago period. The S&P Capital IQ consensus estimate for the period was a loss per share of 10 cents on a normalized basis and a loss per share of 9 cents on a GAAP basis.

Total net operating revenues for the quarter were $8.55 billion, up from $8.11 billion in the year-ago quarter.

Looking ahead, the company expects to record adjusted EBITDA of $9.7 billion to $10.0 billion for the full 2016 fiscal year, at the high end of its previous expectation of $9.5 billion to $10.0 billion. The company also expects operating income of $1.4 billion to $1.7 billion, at the high end of its previous expectation of $1.2 billion to $1.7 billion.

In terms of cash capital expenditures, the company expects to spend $2 billion to $2.3 billion, excluding devices leased through indirect channels. The company's previous expectation was less than $3 billion. Robbiati said the lower expenditures were due to "better visibility" on the timing of cash payments related to the densification of Sprint's network.

"We continue to expect to further ramp up our densification and utilize the expanded toolbox of various cost efficient coverage and capacity options," he said.