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Sprint (S) Inks Deal to Buy a 70% Stake in Kroger's i-wireless

NOK T S VZ

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U.S.national wireless carrier Sprint Corp. (S - Free Report) ) is forging ahead with its wireless expansion plans. The company is about to close its deal with Kroger’s i-wireless – a U.S.-based MVNO (mobile virtual network operator), headquarted in Kentucky -- which uses Sprint’s CDMA, EVDO, WiMAX and LTE networks to provide wireless coverage. Sprint has reached the final stages of regulatory review on the deal to acquire a 70% stake in i-wireless. Each of Kroger and Genie Global Inc., which jointly own i-wireless, will retain a 15% stake in the company. 

The financial terms of the deal – announced by Sprint in May 2016 – have not been disclosed yet.

The Deal

Sprint has been serving as a network provider to i-wireless for years. However, the latest deal will bring efficiencies for both the companies in terms of acquisition costs, device purchasing scale and working capital flexibility.

Sprint claims that it is focused on boosting its Assurance Wireless brand by merging it with i-wireless’ Access Wireless. Sprint also revealed that the combined business will be operated and headed by Paul McAleese, i-wireless’ founder and CEO. Also, the new merged company would maintain its current corporate headquarters in Northern Kentucky.

Sprint and i-wireless have participated in the federal Lifeline program, which was established almost 30 years ago to ensure affordable phone services for low-income consumers. Post this stake buyout, Sprint also claims that i-wireless customers who receive 250 minutes on their Lifeline service plan would be upgraded to the Assurance Wireless plan, which offers 350 minutes a month. The combined entity is expected to grow into a strong competitor, ready to embrace an upgraded Lifeline program.

Latest Merger

Sprint and Nokia Corp. (NOK - Free Report) promoted their three-channel carrier aggregation in the Kansas City’s LTE Plus Network which was followed by a live telecast at Kauffman Stadium in Kansasa City and at Soldier Field in Chicago. The three-channel carrier aggregation was advertised using the latest network technology devices –  the Samsung Galaxy Note7, Galaxy S7, S7 edge, HTC 10 and LG G5 – each having Internet download speeds of more than 230 Mbps (Mega Bits Per Second). Sprint has already expanded the three-channel carrier aggregation in more than 500 cell sites in Chicago.

Risks

Of late, Sprint has been trying all means to check churn and fend off competition. Also, the company has been continually making efforts to lure customers from rival carriers such as AT&T Inc. (T - Free Report) and Verizon Communications Inc. (VZ - Free Report) by offering attractive promotional plans and discounts. This in turn has led to high cash burn and heavy losses. Notably, with more smartphone launches coming up, specifically iPhone 7, we expect the promotional offers to dent margins going ahead.
 

SPRINT CORP Price

Sprint currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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