Earnings day hasn’t been a pleasant experience for Sprint (NYSE: S) in recent years. The company beat earnings estimates for its third quarter Wednesday but in shedding more light on just how much it had to pay in order to get the iPhone 4S, it managed to freak out its investors.
Sprint recorded revenue of $8.3 billion during its quarter, which was pretty close to analyst estimates of $8.33 billion for the period and a slight gain on last year. And while Sprint is still losing money, it managed to narrow its net loss to $301 million or 10 cents per share, a 67 percent improvement on last year’s net loss and far better than analyst expectations of a 22-cent per-share loss during the quarter.
Considering that Sprint also recorded its “best ever day of sales in retail, Web and telesales for a device family in Sprint history,” on October 14th, the day the iPhone 4S went on sale, and one would think the earnings release was cause for celebration. However, investor enthusiasm was tempered by Sprint’s confirmation that it will be paying a heavy price for the right to carry the iPhone: $15.5 billion over the next four years according to the Wall Street Journal. That will involve Sprint paying Apple (NSDQ: AAPL) $200 more for each iPhone it wants to carry as compared to what it pays for other phones in its inventory.
Sprint CEO Dan Hesse promised the investment would be worth the up-front cost, but investors weren’t so sure, sending the company’s stock down 7 percent Wednesday. Sprint will also have to secure new financing as a result of the hit to its cash from making the iPhone 4S deal, and piling on more debt on top of an already heavy debt load rarely makes anyone happy.
At least Clearwire (NSDQ: CLWR) enjoyed the day. Sprint confirmed that it is in talks with Clearwire to help it build out its LTE network, which both companies desperately need now that WiMax is all but dead as a fourth-generation wireless standard. That news sent Clearwire’s stock up just under 20 percent on the day.