Why the Spirit share price bounced 12% this morning

Will this be the deal to renew hopes in Spirit?

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Key points

  • The Spirit Technology Solutions share price was trading 11.8% higher at 85 cents in opening trade
  • A deal has been struck to sell Spirit's wireless assets for up to $21 million to Maret Group
  • The company's customers will be retained with Spirit to pay a service fee to Maret

The Spirit Technology Solutions Ltd (ASX: ST1) share price was looking greener than usual in early trade on Monday.

Investor excitement resonated following the telecommunications company’s announcement to sell its fixed wireless assets. Shares in Spirit were trading 11.8% higher to 85 cents apiece near the open. However, they have since lost some ground and are currently trading at 78 cents, up 2.63%.

Joining the telecom trend

Spirit Technologies is the latest ASX-listed telecommunications company to sell its infrastructure assets. The announcement this morning coincidentally lands at the same time that TPG Telecom Ltd (ASX: TPG) is revealing the sale of its mobile tower and rooftop assets for $950 million.

According to the release, Spirit has entered into a binding sale agreement with Maret Infrastructure Pty Ltd (Maret Group). As part of the deal, the company will divest its wholesale fixed wireless assets for up to $21 million.

The total consideration will comprise an upfront $15 million payment, in addition to a $6 million performance fee over the next 12 to 24 months.

What did management say?

Commenting on the deal, Spirit managing director Sol Lukatsky said:

[…] this transaction returns a material amount of capital for a company of our size. Combined with the divestment of the consumer business last October, the proceeds of this sale, (once completed), will have returned over $20M in cash to our balance sheet in FY22.

Spirit is also undertaking an internal transformation project (Spirit 2.0) to reduce costs and ensure it is well-positioned to capitalise on the growth we are seeing for our services in the SMB market and Cyber solutions.

Much like other tower sales we have seen from Telstra Corporation Ltd (ASX: TLS) and Optus, Spirit will retain its customer relationships and revenues associated with the network. Meanwhile, Maret Group will charge Spirit a wholesale ‘last-mile’ services fee for the provision of services.

Furthermore, the partnership between Spirit and Maret also unlocks the use of Maret’s own spectrum licensing assets for the ASX-listed telecom company. Following this, Spirit plans to bring new fixed wireless products to market under a broader network.

How has the Spirit share price performed?

Despite growing revenue by around 94% year over year and turning profitable, the Spirit share price has been a doozy over the past year.

Specifically, ASX-listed Spirit has tumbled nearly 80% during the 12-month period. Meanwhile, staples of the communications sector, such as Telstra and Uniti Group Ltd (ASX: UWL), have rallied 14% and 78% respectively.

Undoubtedly, Spirit shareholders will be hoping this latest deal represents a pivotal moment for the share price.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended SPIRIT TC FPO. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended SPIRIT TC FPO, TPG Telecom Limited, and Uniti Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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