Sprint Plans to Cut Jobs as Subscriber Rolls Shrink
Source: | Filed in
Telecom | 
Subscribe to Savvy Investor via RSS
11/10/09(Bloomberg) – Sprint Nextel Corp., the third- largest U.S. mobile-phone carrier, will cut as much as 6 percent of its workforce as the company loses subscribers to rivals.
Sprint will eliminate 2,000 to 2,500 jobs, saving at least $350 million annually, the Overland Park, Kansas-based company said in a statement yesterday. The companywide measure extends to contractors and many of the cuts will be completed by year- end, Sprint said.
The action supplements a round of 8,000 job cuts announced in January. Chief Executive Officer Dan Hesse is working to reverse the tide of customer defections, which totaled more than 2 million in the 12 months through September. AT&T Inc. and Verizon Wireless gained market share with new models of Apple Inc.’s iPhone and Research In Motion Ltd.’s BlackBerry.
“They have a lot less subscribers than they had a year ago,” said Christopher King, an analyst at Stifel Nicolaus & Co. in Baltimore. He has a “hold” rating on the shares and doesn’t own any. “The business is shrinking. You don’t need as many people to maintain customer contact.”
Sprint dropped 19 cents, or 5.5 percent, to $3.24 at 9:40 a.m. in New York Stock Exchange composite trading. The shares had gained 87 percent this year before today.
The cuts will cost $60 million to $80 million after Sprint pays for severance packages and outplacement services, the company said.
Contract Subscribers
Last month, Sprint reported a loss of 800,000 contract customers in the third quarter and said its net loss grew to $478 million, or 17 cents a share, from $326 million, or 11 cents, a year earlier. Sales dropped 8.8 percent to $8.04 billion.
The company has increasingly turned to pay-as-you-go customers for growth as contract customers drop service.
The U.S. unemployment rate jumped to 10.2 percent last month, the highest level since 1983, the Labor Department said on Nov. 6. A total of 7.3 million jobs have been lost since the recession started almost two years ago.
Sprint said yesterday it closed 27 call centers in the past seven quarters, because improved customer satisfaction led to fewer calls per subscriber.
The company also agreed today to put more money into Clearwire Corp., part of a $1.56 billion investment by a group that also includes Comcast Corp. and Intel Corp.
Sprint is counting on the network to deliver faster wireless Web access over a broader territory than its competitors. Verizon will have its own fourth-generation service on sale by mid-2010.
