The remarkable improvement in profitability was propelled by the transformation of our cost structure as fiscal 2017 marked the fourth year in a row of at least $1 billion of net reductions in cost of services and selling, general and administrative expenses.*2 Furthermore, we delivered positive adjusted free cash flow, despite a nearly 70% increase in network capex. In addition, our network continued to improve as demonstrated by Ookla Speedtest Intelligence data, which shows Sprint's network was the most improved of any national carrier in fiscal 2017 in terms of average download speeds.*3
Sprint Business Strategy
Transforming the Mobile Industry
Director, Executive Vice President COO, SoftBank Group Corp.
Executive Chairman, Sprint Corporation
Information on this page is as of the end of July 2018.
Providing a faster, more reliable network with better value
On April 29, 2018, we announced a transformative transaction (the “Merger”) to combine with T-Mobile.*1 This combination will accelerate the U.S.'s position and our leadership opportunity to rapidly bring the first and best nationwide, mobile 5G network to market with the breadth and depth needed to fuel a giant wave of innovation and disruption throughout the entire marketplace, including rural America. We believe that with added network scale and resources, this combination will ultimately deliver U.S. consumers and businesses an incredible set of amazing and innovative service offerings at lower prices in areas well beyond the traditional “wireless” business. Together, the transaction is expected to create enormous shareholder value representing significant cost synergies of over $6 billion at annual run-rate, equivalent to net present value of $43 billion, through a single network, rationalized distribution, and SG&A efficiencies.
Achieving milestones of our business turnaround journey
Our fiscal 2017 results demonstrate another milestone in our five-year turnaround plan, delivering customer growth, profitability, and improved network performance all at the same time. I am particularly proud of our employees for delivering these results in the face of the various distractions and noise around potential strategic opportunities for Sprint during the course of the fiscal year.
Increasing profitability: Adjusted EBITDA (U.S. GAAP)
Fiscal 2017 was another remarkable year of customer growth, as we delivered our highest retail phone net additions in five years. We delivered positive phone net additions in all three of our customer groups—consumer postpaid, business, and prepaid—in a market environment where there are several players competing for wireless services when including regional carriers and new entrants in the wireless market such as Comcast. Our postpaid phone net additions in fiscal 2017 were 606,000, which marks the third consecutive year of growth and brings the total over the last three years to nearly two million.
Positioning ourselves to lead in Mobile 5G
No one disagrees with the notion that network is the key to our business. While our network is much improved, we believe that our Next-Gen Network will truly differentiate Sprint over the next couple of years due to our strong spectrum assets that will allow us to deliver gigabit download speeds, and position Sprint to have a competitive LTE network. By building a strong foundation on LTE, we then pave the way for a robust 5G network to take the customer experience to a whole new level.
We built good momentum in our Next-Gen Network deployment in fiscal 2017. First, we upgraded thousands of our existing macro sites in fiscal 2017 to add LTE on 800MHz, 1.9GHz, or 2.5GHz to sites that lacked those bands previously, as we work to tri-band nearly all of our existing sites to provide great coverage and capacity across our footprint. We have successfully transitioned our macro deployment to focus on upgrades to deploy more of our 2.5GHz spectrum to our customers. In addition, we have deployed thousands of traditional outdoor small cells with various vendors, as well as thousands of strand-mounted small cells in cooperation with our cable partners. Also, we launched the Sprint Magic Box*4 about a year ago, and have already deployed more than 200,000 of these boxes to businesses and consumers in approximately 200 cities across the country. Customers with a Sprint Magic Box are enjoying significant improvement in indoor and outdoor coverage, as well as an increase in average download speeds of 200%.
These network improvements, particularly the expanded footprint of 2.5GHz spectrum on both macro and small cells, are delivering performance improvements as seen in Ookla's Speedtest Intelligence data. For example, Sprint saw a 36% year-over-year increase in its national average download speeds, the largest increase of any national carrier.*3 Furthermore, Sprint is No.1 for fastest average download speed in 100 cities, more than twice as many cities as last year.*5
In addition, going forward, we are excited to implement our new roaming agreement with T-Mobile as part of the Merger agreement to provide additional coverage for our customers. With this roaming agreement, Sprint customers will have access to the Sprint and the T-Mobile networks, meaning access to the best of both companies.
Unique Spectrum Portfolio
We are deploying innovative 5G technologies such as massive MIMO as we prepare to launch the first mobile 5G network in the first half of 2019. Massive MIMO radios are software-upgradable to 5G New Radio, allowing us to fully utilize our spectrum for both LTE and 5G simultaneously, while we enhance capacity even further with 5G and begin to support new 5G use cases.
Our spectrum holdings, more specifically the wide bands at 2.5GHz, will put us in an advantageous position to win the mobile 5G leadership. The 2.5GHz band is the “sweet spot” for 5G as our mid-band frequency spectrum provides a balance of coverage, capacity, and speed to deliver mobile 5G. With more than 160MHz of 2.5GHz spectrum available in the top 100 U.S. markets, Sprint has the largest nationwide block of sub-6 GHz 5G spectrum available. As a result, Sprint is the only carrier that does not have to compromise what 5G can deliver.
Passing the baton to Michel Combes for further business efficiency
As effective on May 31, 2018 I took on the role of executive chairman of Sprint, and Michel Combes assumed the position of chief executive officer. The main reason is so I can focus on securing regulatory approval of the Merger, which is the most important goal for optimizing shareholder value. Michel focuses day-to-day on executing our stand-alone plan, leveraging 25 years of experience in the telecom industry both in the U.S. and globally. In addition, I was appointed chief operating officer of SoftBank Group Corp. and will work with the SoftBank Group companies to introduce them to Sprint and the combined company to deliver new business models.
Our team continues to be fully committed to deliver to the American consumer the world's best and fastest 5G network, and increase the equity value.
Reference: Sprint and T-Mobile entered into a definitive agreement to merge
SoftBank Group Corp. announced that as of April 29, 2018 Sprint and T-Mobile have entered into a definitive agreement to merge in an all-stock transaction at a fixed exchange ratio of 0.10256 T-Mobile shares for each Sprint share (or the equivalent of 9.75 Sprint shares for each T-Mobile share). Based on closing share prices on April 27, 2018, this represents a total implied enterprise value of approximately $59 billion for Sprint and approximately $146 billion for the combined company. The new company will have a strong closing balance sheet and a fully funded business plan with a strong foundation of secured investment grade debt at close. The transaction is subject to Sprint and T-Mobile stockholder approval, regulatory approvals, and other customary closing conditions. The transaction is expected to close no later than the first half of 2019. Upon completion of the transaction, the combined company is expected to become an equity method associate of the SoftBank Group, and Sprint will no longer be a subsidiary of the SoftBank Group.
See “Reference: Sprint and T-Mobile US entered into a definitive agreement to merge” below for the details.
Excluding hurricane-related and other non-recurring expenses
Based on Ookla's analysis of Speedtest Intelligence data comparing March 2017 with March 2018 for all mobile results.
A low-cost, self-configuring, LTE small cell that is being used to dramatically improve the user experience, both indoors and outdoors.
Based on Ookla's analysis of Speedtest Intelligence data from January 1, 2018 to March 31, 2018 for all mobile results when comparing cities where the top four national carriers rank.