Shares of Sprint stock fell 4.5% Monday morning after an analyst said there is an increasing risk that the nation’s third largest wireless carrier could file for bankruptcy. The company is facing increased competition, growing debt and steep costs, with flops in Clearwire’s WiMAX technology, a failed LightSquared partnership and a risky $15.5 billion gamble on Apple’s iPhone further complicating its position. Read on for more.
Bernstein analyst Craig Moffett downgraded Sprint shares to Underperform from Market-perform, stating that the company will face “new and larger risks” if Apple launches a 4G LTE-enabled iPhone later this year, a technology which rival networks have more widely available. “To be clear, we are not predicting a Sprint bankruptcy,” Moffett said in a note to investors according to Reuters. “We are merely acknowledging that it is a very legitimate risk. And notwithstanding a recent rally in Sprint shares, we believe that risk is rising.”
While Moffett doesn’t expect Sprint to file for bankruptcy any time soon, he did caution that the network is set to repay $2.6 billion of its debt in 2015, the same year the company will acquire $3 billion in debt from Clearwire. Several other analysts have said that they do not see Sprint filing for bankruptcy in the next few years, however.
“The risk they could go bankrupt has gone up but that’s a very very low risk,” said Pacific Crest analyst Steve Clement. Clement does note that there is a risk Sprint’s planned network upgrades might not work out as planned, but he believes “it’s a decent bet they can pull it off.”