Sprint is set to receive $1.1 billion in cash as part of a transaction involving its device leasing business, working in partnership with parent company SoftBank on a deal that is said to “more closely align” the operator’s cash flows with those associated with supplying equipment to customers.

But at the same time it has trimmed its adjusted EBITDA guidance for fiscal 2015, to $6.8 billion-$7.1 billion from $7.2 billion-$7.6 billion. This is based on the inclusion of transformation programme costs and the devices transactions, although the latter will be accretive to free cash flow.

Tarek Robbiati, CFO of Sprint, said: “Providing mobile devices to customers is the biggest use of cash in the carrier model and with this new structure we have more closely aligned Sprint’s cash flows with those associated with leasing devices to our customers”.

Reuters noted that current two-year installment plans delay money coming to Sprint for handset payments, while it still needs to make up-front purchases from device makers. This has created a cash draw for Sprint, as it looks to transform its fortunes after a long period of woe.

Sprint signed a deal with newly formed business Mobile Leasing Solutions for the sale and lease back of certain devices that are in turn leased to customers, raising $1.1 billion in cash ($1.2 billion total consideration) in exchange for around $1.3 billion of leased device assets.

The transaction, which is expected to close early next month, will improve its liquidity with an “attractive cost of capital, which is well below Sprint’s alternatives in the high-yield debt market”. It is also said to create a “repeatable structure for mitigating the working capital impacts associated with leasing devices to Sprint customers”.

Mobile Leasing Solutions was formed by a group of equity investors including SoftBank, and has secured debt financing from several lenders including international banks and leasing companies.

Brightstar
Another SoftBank unit, Brightstar, has provided support through its financial services business.

Mobile Leasing Solutions is using Brightstar’s lease management and tracking system, and it will also provide reverse logistics and device remarketing services, which will include a forward purchase agreement that is being finalised with Foxconn, “thus minimising the downside risk of future changes in device residual values”.

According to The Wall Street Journal, reaction to the deal was mixed, with some questions over whether it actually improves Sprint’s operating model, or instead just moves some risk off the balance sheet.