Even though Sprint is one of many carriers that will be
selling Apple's newest phones, its stock has gotten the biggest bump by
far this week. Shares are up more than 20% since Sprint announced an iPhone for
Life plan. AT&T and Verizon have barely budged. Shares of
T-Mobile, the company Sprint had hoped to merge with before it became blatantly
obvious that regulators would never approve the deal, are only up a little more
than 2%.
The new CEO Marcelo Claure, who joined Sprint last month, is
impressing investors with comments he's making about how he hopes to dig Sprint
out of the deep hole it fell into following its disastrous merger with Nextel.
A day after the iPhone 6 launch, Sprint unveiled a new plan
called iPhone for Life. You pay $50 a month for texting, data and, oh yeah,
talking. You don't have to pay anything upfront for the phone, but you have to
lease it for an extra $20 a month. After two years you can get a new phone for
free.
Despite the big pop this week, the stock is still down 35%
this year and analysts expect it to keep losing money in 2015 and 2016.
Claure also stressed that Sprint is going to be "very
disciplined in the short term" about cutting costs. That's sorely needed
while the company still bleeds red ink. At the same time, he noted that Sprint
has to do a better job of building out and deploying its 4G network. And Claure
also repeatedly discussed how Sprint had to become the best "value
proposition" in wireless -- i.e. offering the best plans at prices equal
to or lower than its rivals.
Claure has already taken a big step on the pricing side by
eliminating the confusing friends and family plan that it dubbed a
"framily" plan. The fate of Sprint's Frobinson framily, an odd cast
of characters that includes a hamster voiced by Andrew Dice Clay married to
Judy Greer with a couple of quirky kids, other relatives and friends that have
appeared in Sprint TV ads for the past few months, is still unclear.
But there are still doubts about whether he can turn Sprint
around. An analyst at Cowen & Co. upgraded his rating on the stock to
"buy" on Thursday and raised his price target to $8. But on the same
day, a Jefferies analyst reiterated his "sell" rating and lowered his
price target to $4. Sprint is currently trading around $7.
Still, investors should not underestimate Claure. He has the
backing of Sprint's biggest investor -- Japanese tech giant SoftBank. Claure
used to be the CEO of SoftBank telecom subsidiary Brightstar. SoftBank has a
knack for savvy investments and the company seems committed to resurrecting
Sprint.
And SoftBank may soon have more money to spend on Sprint
thanks to one of its investments. SoftBank owns a more than 30% stake in
Alibaba, the Chinese e-commerce giant that's set to go public in the U.S. next
week.
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