Sprint stock plunges; may need money to pay for LTE upgrade

On Friday, Sprint announced that it would be launching a new LTE-based 4G wireless network beginning sometime in 2012. That would normally be good news; indeed, the stock price for the company rose up by as much as 13 percent during the day on Friday. But then Sprint dropped a bomb, claiming it might need to raise more money in order to fund the LTE network, that didn't please investors and sent Sprint's stock price plunging down nearly 20 percent before closing at just $2.41 a share.

Sprint admitted that it would phase out its current WiMax network, which it launched back in 2008, by the end of 2012. PCWorld.com reports that Sprint will continue to sell smartphones and other devices with WiMax support until the end of 2012. Sprint launched the WiMax network with Clearwire but has since stopped adding new US markets for WiMax, and partially as a result, Clearwire's stock price dropped even more than Sprint's in Friday's trading, going down a whopping 32 percent. While Clearwire is an independent company, Sprint is still its largest customer and any reduction in support could be trouble for Clearwire's future.

Sprint hopes to have up to 120 million people under its LTE-based network by the end of 2012, and 250 million people in the US by the end of 2013, but the fact that the company might have to look for some outside funding to pay for the new network could also be a problem for Sprint as it tries to compete with Verizon and AT&T.

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21 Comments

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KingCrimson said,
Sprint is done. Between this and the iPhone deal, they'll be in Chapter 7 within 2 years.

agreed but i think verizon will end up buying them out.

smooth3006 said,

agreed but i think verizon will end up buying them out.

And then monthly plans will easily be $100 a month due to no real competition.

smooth3006 said,

agreed but i think verizon will end up buying them out.

they won't and can't.. Verizon and the DoJ are giving AT&T hell for trying to buyout T-mobile. You best believe that if Verizon tries this with Sprint, that they will get the same Anti-Trust **** that AT&T is getting currently.

4 major providers currently. The government won't allow it to be reduced to 2. Simply not possible.

Shadrack said,

Is that anymore than a rumor at this point?

no because it was officially announced that sprint is getting the iphone 4 now. even my local sprint store has banners up for pre-orders.

smooth3006 said,

no because it was officially announced that sprint is getting the iphone 4 now. even my local sprint store has banners up for pre-orders.

i don't think he meant what you think he meant.

yes sprint has the iphone for sure but where did the dollar amount come from? is that confirmed anywhere? nope.

also, if you try to get an iphone 4s from sprint's website they are totally sold out. the other carriers are not sold out. maybe they have more of the supply but still.

i see good moves from sprint honestly.

Simon- said,
They must be really stupid to announce it before they have the funding organised.

They have no choice but to announce it early. For starters that is part of the securities laws in the US. Secondly, they would need to raise the money with another stock sale. Since that would dilute the ownership of existing shareholders the price falls as existing shareholders get upset.

Frazell Thomas said,

They have no choice but to announce it early. For starters that is part of the securities laws in the US. Secondly, they would need to raise the money with another stock sale. Since that would dilute the ownership of existing shareholders the price falls as existing shareholders get upset.

+1

I recall reading from another source that a Sprint representative said that the company has already set aside capital to fund the LTE rollout. Which is quite believable. Sprint might be the underdog but their actually quite a cash rich company.

WJrandon said,
I recall reading from another source that a Sprint representative said that the company has already set aside capital to fund the LTE rollout. Which is quite believable. Sprint might be the underdog but their actually quite a cash rich company.
Actually, no. They said they will need to raise more money to fund the $10B rollout. They only have $4B in cash.
http://on.barrons.com/mUfK0c