Sprint's new CEO open to selling wireline business

Sprint's (NYSE: S) new CEO Marcelo Claure reiterated during the third-quarter earnings call that the company is open to selling its struggling wireline assets, a move that would allow the company to focus exclusively on its wireless business.

The potential sale of this business came up near the end of the earnings call when a financial analyst broached the topic. Sprint executives did not give any specific details about plans for the wireline business other than to say they were reviewing their options.

"As it relates to the wireline, I am going to let Joe answer that question, but to answer your questions from a--how do I look at it, we are undergoing a pretty deep review of wireline and that's something that we are going to come out in the next few months and give you a latest status update on what exactly are we are going to do with the wireline business," Claure said during the earnings call, according to a Seeking Alpha transcript.

Joe Euteneuer, CFO of Sprint, added that while they are willing to talk to interested parties, he would not confirm if they have spoken to any specific companies about a deal.

"Yes, I think, historically, we have answered the question that, we have entertained any possibilities of trying to use that asset in any type of deal or something like that," Euteneuer said. "So we are open--our door is always open to talk to someone in regards to that asset. And although there it does take some work to separate it et cetera, it is something that we are open to discuss."

Who would be interested in Sprint's wireline assets?

Rumors about the potential sale of the wireline business were swirling not long after Claure took over the reins of the company from Dan Hesse.

Potential suitors could include Level 3 Communications, which just completed its acquisition of tw telecom, according to an Investor's Business Daily article citing an Oppenheimer analyst report. Oppenheimer suggested that Sprint could get $4 billion for the assets.

Robert Powell, chief editor and CTO of Telecom Ramblings, disagreed with the $4 billion price tag. Given the amount of integration Level 3 is going to conduct for the tw telecom assets, Powell said in an article that "a deal for Sprint's wireline business would have to be at a pretty big discount to get their attention."

Powell added that the more likely suitors could be either CenturyLink (NYSE: CTL) or Windstream, which is in the process of spinning out its wireline assets off into a real estate investment trust (REIT).

While rumors about such a sale have been swirling for months, Claure's remarks come as the service provider's wireline unit reported another disappointing quarter with third-quarter revenues declining year-over-year to $708 million from $777 million.

Each of the wireline segments, including voice, data and Internet, all declined year-over-year. Voice and data revenues were $294 million and $53 million, down year-over-year from $333 million and $57 million, respectively. Likewise, Sprint reported that Internet revenues were $340 million compared to $373 million in the same period a year ago.

From an overall company revenue perspective, the service provider reported consolidated net operating revenues were $8.5 billion. However, it suffered an operating loss of $192 million and adjusted EBITDA of nearly $1.4 billion.

Shares of Sprint were listed at $5.11, up $1.09 or 17.66 percent, in Tuesday morning trading on the Nasdaq stock exchange.

For more:
- see the earnings release
- and the earnings transcript (sub. req.)

Special report: Wireline telecom earnings in the third quarter of 2014

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