Citi: Sprint Cash Burn Now Expected To Be Larger

In a report published Tuesday, Citi analysts maintained a Neutral rating on

, with a price target of $5 The analysts had earlier expected Sprint to exceed consensus OIBDA for CY15 and CY16, based on the "non-cash accounting benefits from leasing devices to customers." The estimates were later "refined" to incorporate the cost of prepaid equipment. The reported OIBDA estimates for CY15 and CY16 have now been reduced to $6.6B and $9.8B, respectively, to reflect the cost of prepaid devices as well as other adjustments and "consider cost cutting & the cost of acquisition & retention on a collective basis." The EPS estimates for 2015 and 2016 have been reduced from $0.01 to -$0.37 and from $0.10 to -$0.06, respectively. "Feedback from clients suggests that investors are more likely to focus on FCF and are likely to adjust GAAP OIBDA if lease accounting provides meaningful non-cash benefits to reported results," the analysts said. In the report Citi noted, "We believe Sprint will try to monetize the spectrum within its own operations, first, by leveraging its downlink-centric 2.5 GHz spectrum position in a number of markets over the next 12 months. As a result, we don't expect a near-term sale of the 2.5 GHz spectrum in the absence of a very attractive offer for a portion of its holdings." The analysts now expect "an even larger" free cash flow burn for this year, estimating it at $5 billion.