S

Publicly traded companies mentioned herein: Sprint (S), T-Mobile (TMUS), Verizon (VZ), AT&T (T) and Comcast (CMCSA)

Highlights

The presenter is short shares of Sprint on the thesis that the struggling carrier’s core problems are simply not fixable. Softbank Chairman Masayoshi Son’s investment in the company has long provided comfort to shareholders who reason an operator with his famed reputation simply would never willingly become involved in a losing proposition, but the presenter believes Son had only one objective in mind when he and Softbank took control of the company: to merge it with T-Mobile (TMUS) and thereby create a viable third wireless carrier in the US. The presenter believes that when regulators ultimately chose not to support the merger, Son had no Plan B. Since the time of the attempted merger, Son has engaged in a lot of hype and confidence building around the business, adding to Softbank’s majority stake and in the process helping buoy shares. At the same time, however, the bond market has shown signs of nervousness, with Sprint bonds going from par to as low as 75 cents before rallying to around 85 cents. Meanwhile, credit default swaps on the company’s debt have blown out from 150 bps to around 800 bps, with Moody’s recently downgrading Sprint’s bonds.