One of the chief accounts that relates to the strategy of Sprint is the company’s year over year growth in postpaid wireless customers. The company’s accounting from the first quarter of 2017 reveals that it added 88,000 net postpaid customers during the previous fiscal year. This is a significant addition. At the same time, accounting from TMobile on new customer additions reveals smaller percentage gains in new customers. Likewise, TMobile reported during this year a four-plus million customer loss from its LifeLine program, which it deemed to be uneconomical for its customer base. This is a problem for the company and could be one of the reasons why this merger made sense. Both companies were able to grow their customer bases on a year over year basis, but because TMobile had suffered a major loss in a part of its customer base, it could have seen the merger with Sprint as an opportunity to pick up new customers where its prior customers were lost (Werden & Froeb).
One of the changes that must be made in the accounting to make the two companies more comparable in this regard. TMobile made a change in its accounting to put the monies owed through an equipment installment plan in “other revenues” in order to make the accounting more reflective of the situation occurring within the company. The same such change should be made by Sprint to ensure that the accounting statements of the two companies can be more closely compared and aligned.
There are no red flags in the accounting statements of the two companies that suggest income manipulation. The filings provide explanations for changes that took place, and those explanations are relatively easy to buy. This is a critical part of the process and it helps to suggest that the company was not trying to manipulate or otherwise conceal fraud through its accounting practices.
- Sprint. News Release. 2017. Retrieved from http://s21.q4cdn.com/487940486/files/doc_financials/quarterly/2017/q1/01_Fiscal-1Q17-Earnings-Release-FINAL.pdf
- T-Mobile. 2017 Annual Report. Retrieved from http://investor.t-mobile.com/Cache/1500109984.PDF?O=PDF&T=&Y=&D=&FID=1500109984&iid=4091145
- Werden, Gregory J., and Luke Froeb. “Don’t Panic: A Guide to Claims of Increasing Concentration.” (2018).