Sprint Nextel is planning to raise $500 million in a public offering, the company said in a filing with the Securities and Exchange Commission Monday.
The third-largest U.S. carrier said the half-billion dollars would go toward general business expenses, which could include paying for acquisitions, debt services, network expansion, and more. The company will raise the funds by offering senior unsecured notes that will mature in August 2017, and a Sprint spokesperson declined to elaborate on the exact purpose of the funds.
Fitch Ratings assigned a "BB" rating to the 8-year notes, and the ratings agency said Sprint will have a tough time regaining its market share of postpaid subscribers due to the low churn rate of its competitors, and Sprint's competitive position. Sprint was the only major carrier to lose subscribers last quarter, and rivals T-Mobile, AT&T, and Verizon Wireless continue to add new customers at a substantial rate.
Sprint recently exclusively launched the Palm Pre handset, and the touch-screen smartphone has broken the company's sales records. While it has received good reviews, the Pre hasn't been able to poach away subscribers from other carriers like the iPhone did for AT&T. Part of the problem may be that Verizon said it will offer a similar device in early 2010, which may be keeping that company's subscribers from switching networks.
Sprint is still plagued with the stigma of having wretched customer service, although CEO Dan Hesse has implemented multiple in-store programs to help address this issue, and Sprint said this has led to marked improvements in customer satisfaction surveys.
The prepaid market has been a bright spot for Sprint, as its Boost Mobile subsidiary has added more than 1 million subscribers since it introduced a $50 unlimited plan. Sprint will be placing a major bet on prepaid services, as it will pay roughly $500 million to acquire Virgin Mobile USA. This strategy is not without risks though, as the average revenue per user with prepaid subscribers is lower than revenue from postpaid users.
Most companies are just starting the hard work of mobilizing workforces by bringing the software they use to smartphones. InformationWeek analyzed this issue in an independent report, and it can be downloaded here (registration required).