Despite Sprint’s growing subscriber base, Sprint’s consolidated revenue declined 3.9% due to lower wireless service and wireline revenue and the negative impact of recent natural disasters such as hurricane-related credits. Postpaid phone ARPU declined 9.8 percent year-to-year due to Sprint’s pricing promotions and customers migrating to discounted non-subsidized service plans. Sprint’s service revenue is also negatively impacted by recent accounting changes made to the carrier’s device insurance programs, which are accretive to EBITDA.
Sprint benefited from nearly $400 million in combined year-to-year reductions in operating costs in 3Q17, which contributed to consolidated EBITDA margin rising 570 basis points year-to-year to 35.5%. Despite its improved cost efficiency, Sprint remains challenged by its long-standing financial struggles such as its high debt load and consistent net losses. The anticipated T-Mobile merger proposal will help remedy the aforementioned challenges while providing the new joint-company the subscribers and network resources to compete on the scale of Verizon and AT&T. Furthermore, Sprint will become better positioned to capitalize on the upcoming 5G era by combining its vast 2.5 GHz licenses with T-Mobile’s 600MHz spectrum.
Steve Vachon is a telecom analyst with Technology Business Research, Inc.