Buy our book here.

rules and regulationDespite the recent cost cutting exercise that Sprint Corp undertook across its budgets the future of the company is still under question. Kim (2014) reported that “if you add up Sprint’s annual capital expenditure and interest payments, it cannot cover them from its annual operating profit cash flows. If things stay as they are, they’ll be in dire straits”.

With the budget cuts not working Sprint considered expanding the business by acquiring T Mobile. They considered an investment in this area worthwhile because it would increase their market share and importantly the cash flows. However; as discussed in chapter 15, just because the Net Present Value (NPV) is positive for a particular investment it does not mean the investment will go ahead. In the case of Sprint Corp, despite intense lobbying with the regulators, they have pulled out of the acquisition because the regulators did not want this to be successful. The regulators will be considering this investment from a competition perspective – if Sprint acquired T Mobile the number of competitors in the industry would be reduced and this would have a direct impact on the service and prices given to customers.

Kim, S. (2014) Sprint drops bid to buy T-Mobile after regulatory resistance. Reuters 6th August 2014.