Sprint's (S) 50% Sale

Sprint’s (S) shares are now down by more than half from their 52-week high, trading at $9.35 compared to $23.42. The company’s market cap has fallen to under $27 billion, less than one time revenue.

It may be time for Comcast (CMCSA) to have another look at owning a large wireless company. With telecom operators like AT&T (T) and Verizon (VZ) coming after the cable base with their fiber broadband and TV products, Comcast lacks a cellular offering. Sprint is the No.3 operator in terms of total subscribers behind T and VZ with 54 million customers.

Comcast has said it will upgrade its infrastructure to increase broadband speeds and add hundreds of films to its VOD cable library. It will even deliver premium content through a web portal. But, all of that it not enough. It lacks the ability to bundle wireless products with it other offerings.

As wireless connection speeds get faster through WiMax and 4G networks, cable may lose some more customers who will turn to over-the-air broadband. Sprint is a substantial hedge against that.

With $700 million in annual costs being cut out, Sprint may actually start to do modestly well if it can improve subscriber retention. Bundling with cable TV and broadband services would help.

In its last quarter, Sprint has just shy of $400 million in operating income on revenue of $10 billion. The topline is not growing. The company’s $21 billion in debt is primarily notes due between now and 2032.

Comcast can afford Sprint, and it may need it more than it will admit.

Douglas A. McIntyre