Andre Yoskowitz
19 Mar 2012 15:43
Sprint shares are down 5 percent today after an analyst downgraded the company.
In his report, Sanford Bernstein analyst Craig Moffett says the company has a substantial risk of bankruptcy in the next few years. The analyst used a financial "swap agreement" known as credit-default swaps (CDS) to make the assumption.
Moffett says there is a 50 percent chance of the company seeking bankruptcy protection in the next five years: "We suspect that this implied probability of bankruptcy will come as a surprise to most equity investors."
In 2005, the carrier acquired Nextel, which will likely prove to be the company's downfall, says Moffett. Subscribers have been leaving Nextel at an alarming pace, while Sprint remains in charge of upkeep of the Nextel network, which is different from their own CDMA network.
Additionally, CEO Dan Hesse made a "all-in" bet this year on the iPhone, paying Apple $15 billion for rights to the popular smartphone over the next 5 years.