Sprint says to be cash-flow positive next year, shares soar

By Aishwarya Venugopal

(Reuters) – Sprint Corp reported better-than-expected first-quarter revenue as big discounts attracted more postpaid subscribers, and the No. 4 U.S. wireless carrier said it expected to be cash flow positive next fiscal year after breaking even this year.

The company’s shares surged more than 28 percent to $5.93 on Monday – their biggest intraday percentage gain ever – after it also said it had enough money to fund its business this year.

Some analysts and investors had raised questions about Sprint’s financial position after majority owner SoftBank Corp <9984.T> agreed earlier this month to buy UK chipmaker ARM Holdings Plc for $32 billion.

Sprint had negative cash flow of $3.17 billion in the financial year ended March 31.

“We expect that we will have adequate sources to provide all the capital necessary to fund the business and repay the debt maturities due in FY 16,” Chief Financial Officer Tarek Robbiati said on a conference call with analysts.

Sprint said it added a net 173,000 postpaid phone subscribers in the three months ended June 30 – the biggest increase for any first quarter in nine years. That compared with a net loss of 12,000 subscribers in the same period last year.

“We believe the turnaround story is taking shape,” Wells Fargo analyst Jennifer Fritzsche said in a client note.

Sprint, which has been burning through cash as it faces intense competition for subscribers, has said it aims to slash costs by more than $2 billion this fiscal year.

The carrier, based in Overland Park, Kansas, also experienced its lowest postpaid phone churn in the company’s history, Chief Executive Marcelo Claure said.

Postpaid phone user churn, or the rate at which subscribers defect, was 1.39 percent.

However, Sprint’s net loss widened to $302 million, or 8 cents per share, in the quarter from $20 million, or 1 cent per share, a year earlier.

The latest quarter included contract termination charges of $113 million, primarily related to an agreement with wireless carrier Ntelos.

Sprint, in which Japan’s SoftBank holds a more than 80 percent stake, said its net operating revenue fell marginally to $8.01 billion. Analysts on average had expected $7.98 billion, according to Thomson Reuters I/B/E/S.

Up to Friday’s close, Sprint’s shares had risen 27.6 percent since the start of the year.

(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Maju Samuel and Ted Kerr)