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Sprint stock drops on analyst downgrade

Sprint Nextel shares were down nearly 5 percent at midday after an analyst report said the company’s gamble on the iPhone increased its risk of filing for bankruptcy.

The analyst, Craig Moffett of Bernstein, said Sprint, the No. 3 U.S. mobile provider based in Overland Park, faced steep costs because of factors such as its iPhone deal with Apple. Sprint Nextel is betting big on the iPhone’s eventually bringing it lots of data hungry, and thus more profitable, customers. But wireless companies — Sprint followed AT&T and Verizon in providing the iPhone — pay a hefty subsidy to Apple for each iPhone.

Moffett downgraded Sprint shares to “underperform” from “market-perform,” saying that the company will face “new and larger risks” if Apple launched a high-speed iPhone later this year based on a technology that Sprint’s bigger rivals have installed more widely than Sprint.

“To be clear, we are not predicting a Sprint bankruptcy. We are merely acknowledging that it is a very legitimate risk. And notwithstanding a recent rally in Sprint shares, we believe that risk is rising,” Moffett said in a research note.

A Sprint spokesman was not immediately available to comment.

Sprint shares were down 14 cents, to $2.75, in midday trading on the New York Stock Exchange after the report was released.

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