Sprint Reports Highest Postpaid Phone Net Additions in Three Years, Lowest-Ever Third Quarter Postpaid Churn, and Increases Adjusted EBITDA* Guidance with Third Fiscal Quarter 2015 Results

• Operating loss of $197 million and Adjusted EBITDA* of $1.9 billion
  • Nearly $800 million of year-to-date reduction in cost of service and selling, general, and administrative expenses builds momentum for 2016 targets
• Raising fiscal year 2015 Adjusted EBITDA* guidance from previous expectation of $6.8 billion to $7.1 billion to a range of $7.7 billion to $8 billion
  • Preliminary estimate for fiscal year 2016 Adjusted EBITDA* of approximately $9.5 billion to $10 billion
• Sprint platform postpaid net additions of 501,000 improved by 471,000 year-over-year
  • Highest postpaid net ports on record and net port positive for the fourth consecutive quarter
• Sprint platform postpaid phone net additions of 366,000 compared to net losses of 205,000 in the prior year quarter – an improvement of 571,000 year-over-year
  • Highest net additions in three years and positive for the second consecutive quarter
• Lowest-ever third quarter Sprint platform postpaid churn of 1.62 percent improved 68 basis points from the prior year quarter
  • Best year-over-year improvement in 12 years
• Significant steps taken to improve liquidity
  • Completed first sale-leaseback transaction with Mobile Leasing Solutions, LLC, providing $1.1 billion in cash in December
  • Increased existing receivables facility by $1 billion to $4.3 billion of total capacity
• Network performing at best-ever levels across voice and data metrics with average download speeds more than tripling over the last two years
  • Delivered the fastest download speeds of any national carrier according to Nielsen crowd-sourced data
  • Most metro RootMetrics^® RootScore^® awards in the company’s history in the second half of 2015

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(Graphic: Business Wire)

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OVERLAND PARK, Kan. (BUSINESS WIRE), January 26, 2016 – Sprint Corporation (NYSE:S, news, filings) today reported operating results for the third fiscal quarter of 2015, including growth in postpaid phone customers for the second consecutive quarter with the highest net additions in three years at 366,000, the lowest-ever postpaid churn for a third quarter at 1.62 percent, and the highest postpaid net ports on record. The company also reported net operating revenue of $8.1 billion, operating loss of $197 million, and Adjusted EBITDA* of $1.9 billion, and is raising its fiscal year 2015 Adjusted EBITDA* guidance from the previous expectation of $6.8 billion to $7.1 billion to a range of $7.7 billion to $8 billion. In addition, the company’s preliminary estimate for fiscal year 2016 Adjusted EBITDA* is approximately $9.5 billion to $10 billion.

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“It’s clear from our quarterly results that we are making great progress on achieving our goals,” said Sprint CEO Marcelo Claure. “Revenue has stabilized, costs are coming out faster than expected, postpaid phone net additions were the highest in three years, postpaid churn was the lowest-ever for a third quarter, and the network is performing at best-ever levels.”

Building Momentum on Cost Reduction Effort

Sprint remains on track to exceed its cost reduction target for fiscal 2015 and has realized a nearly $800 million reduction in cost of service and selling, general, and administrative expenses year-to-date, including $500 million in the third quarter. Sprint continues to progress toward a sustainable reduction of $2 billion or more of run rate operating expenses exiting fiscal 2016 and expects approximately $1 billion of transformation program costs, which are expected to be split relatively evenly between operating expenses and capital expenditures, to be incurred across fiscal 2015 and 2016 to achieve that run rate benefit.

“Our transformation is taking hold and the momentum is accelerating,” said Sprint CFO Tarek Robbiati. “Most importantly, we expect these cost reductions to be achieved without compromising network quality or impacting the customer experience.”

Quarterly Financial Results

• Net operating revenues of $8.1 billion decreased 10 percent year-over-year, but have stabilized over the last three quarters, and grew two percent sequentially. The year-over-year decline was due to lower wireless service revenues, primarily related to customer shifts to rate plans associated with device financing options, and lower equipment revenues due to a shift from installment billing and subsidized sales, which recognize more revenue at the point of sale, to leasing sales, which recognize revenues over time.
• Wireless service revenues plus installment plan billings and lease revenue of $7.1 billion increased one percent from the prior year period, primarily because of higher lease revenue and growth in postpaid phone customers.
• Consolidated Adjusted EBITDA* of $1.9 billion improved from the prior year period, as expense reductions more than offset the decline in operating revenues. Total expenses improved primarily because of lower cost of product expenses related to device leasing options for which the associated cost is recorded as depreciation expense, and $500 million of lower selling, general, and administrative expenses.
• Operating loss of $197 million included $209 million of severance and exit costs and compared to an operating loss of $2.5 billion in the year-ago quarter, an improvement of approximately $2.3 billion. Adjusting for the $209 million of severance and exit costs in the current quarter and a non-cash impairment charge of approximately $2.1 billion in the prior year quarter, operating loss would have improved by approximately $400 million year-over-year.
• Net loss of $836 million, or $0.21 per share, compared to a net loss of $2.4 billion, or $0.60 per share, in the year-ago period, an improvement of approximately $1.5 billion. Adjusting for the aforementioned severance and exit costs and impairment charge, net loss would have improved by approximately $300 million year-over-year, or $0.08 per share.

Positive Postpaid Phone Net Additions Help Stabilize Top Line

Sprint continues to focus on attracting and retaining more postpaid phone customers by providing a compelling value proposition, including the recently introduced 50 percent off Verizon, AT&T and T-Mobile rate plans promotion, which has been extended to Feb. 11 because of its popularity. A better network experience has also resulted in dramatic year-over-year improvements in postpaid churn. For the second quarter in a row, the company reported positive postpaid phone net additions and posted year-over-year growth in wireless service revenues plus installment plan billings and lease revenue, which is a better representation of the total service and equipment charges on its customers’ monthly bills.

The company also reported the following Sprint platform results, which reflect its focus on higher value postpaid connections:

• Total net additions were 491,000 compared to 967,000 in the prior year quarter – a decline of 476,000 year-over-year.
• Postpaid net additions of 501,000 compared to 30,000 in the prior year quarter – an improvement of 471,000 year-over-year.
• Postpaid phone net additions were 366,000 compared to net losses of 205,000 in the prior year quarter – an improvement of 571,000 year-over-year.
• Prepaid net losses of 491,000 compared to net additions of 410,000 in the prior year quarter – a decline of 901,000 year-over-year.
• Based on the success of the base loyalty program that the company implemented last quarter for Boost and Virgin, it has decided to implement the program more broadly for its prepaid base. As a result, the company will report these customers as part of its prepaid base and has adjusted the 175,000 previously recorded last quarter as postpaid back into prepaid for better comparability across periods.
• Wholesale and affiliate net additions of 481,000 compared to 527,000 in the prior year quarter – a decline of 46,000 year-over-year.

Company Delivers on Funding Initiatives with More to Come

Total liquidity was $6 billion at the end of the quarter, including $2.2 billion of cash, cash equivalents and short-term investments, $3 billion of undrawn borrowing capacity under the revolving bank credit facility, and approximately $800 million of undrawn availability under the receivables facility. In addition, the company had approximately $600 million of availability under vendor financing agreements that can be used toward the purchase of 2.5 GHz network equipment, with approximately $500 million of additional availability coming in April. During the quarter, the company closed two significant transactions that immediately improved its liquidity position.

• Completed the first sale-leaseback transaction with Mobile Leasing Solutions, LLC providing a $1.1 billion cash infusion, as well as creating a repeatable structure for the company to mitigate the working capital impacts associated with the leasing model. The company expects to execute future transactions generally on a quarterly basis, and expects to receive proceeds totaling $3 billion to $4 billion in fiscal 2016, depending on the amount of qualified leasing sales to its customers.
• Amended existing receivables facility to include the sale of certain future lease receivables, thus increasing the maximum funding limit by $1 billion to a total of $4.3 billion. These future lease receivables are related to devices not included in the aforementioned sale-leaseback transaction with Mobile Leasing Solutions, LLC.

Sprint continues to use its assets to help fund the business and fuel future growth. Together with SoftBank and its partners, the company is establishing a network-related financing entity that could provide $3 billion to $5 billion of incremental funding in fiscal 2016. This entity is expected to raise proceeds from Sprint’s existing radio access equipment, as well as a combination of new assets associated with the network densification and a small portion of its spectrum portfolio. Sprint expects the first transaction to close by the middle of calendar 2016. Together with existing facilities, these sources of liquidity are expected to fund the transformation and repayment of all maturities that come due over the next year.

LTE Plus Network Delivers Fastest Download Speeds

Sprint remains focused on building a network that delivers the consistent reliability, capacity and speed that customers demand, and its recent deployment of two-channel (2×20 MHz) carrier aggregation in the 2.5 GHz band is driving network performance that is beating the competition. An analysis of Nielsen Mobile Performance crowd-sourced data from October through December 2015 showed that Sprint’s LTE Plus Network beat Verizon, AT&T and T-Mobile by delivering the fastest LTE download speeds. The company has deployed its LTE Plus Network in more than 150 major markets across the country and has plans for expansion in the coming months.

Additionally, independent mobile analytics firm RootMetrics^® awarded Sprint a company record 212 first-place (outright or shared) RootScore^® Awards for overall, reliability, speed, data, call, or text network performance in the 125 metro markets measured in the second half of 2015, beating T-Mobile for the first time ever and receiving 57 percent more awards than the prior year periodⁱ. The company also saw median downlink speeds in these metro markets more than triple on average from the first half of 2014 testing period and measured the fastest median download speeds of any carrier in 16 cities, including Austin, Dallas, Denver, Houston, Indianapolis, Kansas City, and Phoenix.

The company remains committed to its plan of significantly densifying the network through the deployment of small cells to further improve network performance and customer experience.

Financial Outlook

• As a result of accelerated cost reductions, the company is raising its guidance for fiscal year 2015 Adjusted EBITDA* from its previous expectation of $6.8 billion to $7.1 billion to a range of $7.7 billion to $8 billion.
• The company is also raising its guidance for fiscal year 2015 operating income from its previous expectation of an operating loss of $50 million to $250 million to operating income of $100 million to $300 million.
• The company continues to expect fiscal year 2015 cash capital expenditures to be approximately $5 billion, excluding the impact of leased devices sold through indirect channels.
• The company’s preliminary estimate for fiscal year 2016 Adjusted EBITDA* is approximately $9.5 billion to $10 billion.

Conference Call and Webcast

• Date/Time: 8:30 a.m. (ET) Tuesday, Jan. 26, 2016
• Call-in Information
  • U.S./Canada: 866-360-1063 (ID: 21719348)
  • International: 706-634-7849 (ID: 21719348)
• Webcast available via the Internet at www.sprint.com/investors
• Additional information about results, including the “Quarterly Investor Update,” is available on our Investor Relations website

*FINANCIAL MEASURES

Sprint provides financial measures determined in accordance with GAAP and adjusted GAAP (non-GAAP). The non-GAAP financial measures reflect industry conventions, or standard measures of liquidity, profitability or performance commonly used by the investment community for comparability purposes. These measurements should be considered in addition to, but not as a substitute for, financial information prepared in accordance with GAAP. We have defined below each of the non-GAAP measures we use, but these measures may not be synonymous to similar measurement terms used by other companies.

Sprint provides reconciliations of these non-GAAP measures in its financial reporting. Because Sprint does not predict special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, Sprint does not provide reconciliations to GAAP of its forward-looking financial measures.

The measures used in this release include the following:

EBITDA is operating income/(loss) before depreciation and amortization. Adjusted EBITDA is EBITDA excluding severance, exit costs, and other special items.Adjusted EBITDA Margin represents Adjusted EBITDA divided by non-equipment net operating revenues for Wireless and Adjusted EBITDA divided by net operating revenues for Wireline. We believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors because they are an indicator of the strength and performance of our ongoing business operations. While depreciation and amortization are considered operating costs under GAAP, these expenses primarily represent non-cash current period costs associated with the use of long-lived tangible and definite-lived intangible assets. Adjusted EBITDA and Adjusted EBITDA Margin are calculations commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the telecommunications industry.

Sprint Platform Postpaid ABPA is average billings per account and calculated by dividing postpaid service revenue earned from postpaid customers plus installment plan billings and lease revenue by the sum of the monthly average number of postpaid accounts during the period. We believe that ABPA provides useful information to investors, analysts and our management to evaluate average Sprint platform postpaid customer billings per account as it approximates the expected cash collections, including installment plan billings and lease revenue, per postpaid account each month.

Sprint Platform Postpaid Phone ABPU is average billings per postpaid phone user and calculated by dividing service revenue earned from postpaid phone customers plus installment plan billings and lease revenue by the sum of the monthly average number of postpaid phone connections during the period. We believe that ABPU provides useful information to investors, analysts and our management to evaluate average Sprint platform postpaid phone customer billings as it approximates the expected cash collections, including installment plan billings and lease revenue, per postpaid phone user each month.

Free Cash Flow is the cash provided by operating activities less the cash used in investing activities other than short-term investments, including changes in restricted cash, if any, and excluding proceeds from the sale-leaseback of assets. We believe that Free Cash Flow provides useful information to investors, analysts and our management about the cash generated by our core operations after interest and dividends, if any, and our ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments.

Net Debt is consolidated debt, including current maturities, less cash and cash equivalents, short-term investments and, if any, restricted cash. We believe that Net Debt provides useful information to investors, analysts and credit rating agencies about the capacity of the company to reduce the debt load and improve its capital structure.

SAFE HARBOR

This release includes “forward-looking statements” within the meaning of the securities laws. The words “may,” “could,” “should,” “estimate,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “target,” “plan, “outlook,” “providing guidance,” and similar expressions are intended to identify information that is not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to our network, connections growth, and liquidity; and statements expressing general views about future operating results — are forward-looking statements. Forward-looking statements are estimates and projections reflecting management’s judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, the development and deployment of new technologies and services; efficiencies and cost savings of new technologies and services; customer and network usage; connection growth and retention; service, speed, coverage and quality; availability of devices; availability of various financings, including any leasing transactions; the timing of various events and the economic environment. Sprint believes these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date when made. Sprint undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our company’s historical experience and our present expectations or projections. Factors that might cause such differences include, but are not limited to, those discussed in Sprint Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2015. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

About Sprint:

Sprint (NYSE: S) is a communications services company that creates more and better ways to connect its customers to the things they care about most. Sprint served more than 58.4 million connections as of December 31, 2015 and is widely recognized for developing, engineering and deploying innovative technologies, including the first wireless 4G service from a national carrier in the United States; leading no-contract brands including Virgin Mobile USA, Boost Mobile, and Assurance Wireless; instant national and international push-to-talk capabilities; and a global Tier 1 Internet backbone. Sprint has been named to the Dow Jones Sustainability Index (DJSI) North America for the past five years. You can learn more and visit Sprint atwww.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.

ⁱ Rankings and underlying data metrics based on 125 RootMetrics Metro RootScore Reports from 2H 2014 and 2H 2015 for mobile performance as tested on best available plans and devices on four mobile networks across all available network types. 16 markets that measured the fastest median download speeds in 2H 2015: Austin, TX; Chattanooga, TN; Corpus Christi, TX; Dallas, TX; Denton, TX; Denver, CO; Houston, TX; Indianapolis, IN; Kansas City, MO; McAllen, TX; Ogden, UT; Phoenix, AZ; Spokane, WA; Toledo, OH; Wichita, KS; and Youngstown, OH . Your experiences may vary. The RootMetrics award is not an endorsement of Sprint. Visit www.rootmetrics.com for more details.

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