Stressed Out: Sprint Could Be No-Show in FCC Auction; Trips Up on Austerity Plan

 | Mar 21, 2016 | 4:35 PM EDT
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This article is part of a Real Money series on 20 companies investors should consider adding to their distressed watch list.

As Sprint's (S) chief rivals line up for a piece of the Federal Communications Commission's wireless airwave auction next week -- which is expected to fetch between $10 billion and $40 billion from bidders -- Sprint's single-minded imperative to cut costs will likely preclude the company from attending.

Sprint's austerity objective seems to be all the telecom giant can do in its effort to manage a hefty stack of high-yield bonds, even as frustrated shareholders watch rivals successfully build out their networks.

The primary obstacle for Sprint is that it's carrying almost $34 billion in debt with maturities looming, and cash doesn't seem to stop running off its books. The $2.2 billion in cash reserves Sprint reported in its last reported quarter is down more than 40%, year over year. (Sprint is a member of Real Money's "Stressed Out" watch list,)

"So it's fair to say that our top priorities are pretty simply around cost," Sprint CFO Tarek Robbiati said at a March industry conference. "Top priority number one is cost take-out, number two is cost take-out, number three is cost take-out. In case, you haven't heard it, the top priority is cost take-out."

Meanwhile, Sprint's rivals among the Big Four U.S. telecom carriers -- including Verizon (VZ), AT&T (T), and T-Mobile (TMUS) -- have all submitted applications to bid for geographic ranges of airwave frequencies being sold to telecoms by the FCC beginning next week. A similar auction was held last year, in which the FCC booked about $45 billion in revenue on telecom assets re-sold to the private market.

Of its $34 billion debt burden, Sprint has roughly $7.6 billion of unsecured bonds maturing this year. And the shares have stagnated alongside Sprint's debt in secondary markets. Sprint shares are down 12% on the year, while Verizon and AT&T are trading up 16% and 13%, respectively. T-Mobile stock is down 4% over the period.

For more on Real Money's 20 distressed companies to watch:

Stressed Out: Introducing Real Money's Distressed Index

Stressed Out: Sprint's Owner Plans to Buy Network out of High-Yield Debt Mess

Stressed Out: Sprint Is Collapsing Under the Weight of Its High-Yield Debt

Stressed Out: 3-D Printing and Semiconductors Are Getting Slammed

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