Sprint cuts 4,000 jobs amid subscriber hemorrhage

January 22, 2008

Sprinting subscribers

Sprint Nextel Corp. may have gained subscribers in the last quarter of 2007, but it is shedding older ones at a rate alarming enough to call for a companywide restructuring.

The wireless carrier reported a net gain of 500,000 subscribers through wholesale channels, the addition of 256,000 Boost Unlimited users and net new 20,000 subscribers within affiliate channels.

These gains were undermined by net losses, however: 202,000 traditional prepaid users and 683,000 post-paid subscribers abandoned ship in that fourth-quarter period.

Industry observers say that losing prepaid customers is a bitter pill to swallow. They are considered the most valuable in the industry because they sign up for annual plans and pay at the end of each month.

Sprint, Reston, VA, said it anticipates continued downward pressure on subscriber trends, revenues and profitability this year. This can be attributed to its inability to compete with the service and device offerings of its competitors.

In response, Sprint is restructuring itself by reviewing operations and market approach as per its newly appointed president/CEO, wireless industry veteran Daniel Hesse.

The company’s plans include the elimination of approximately 4,000 internal positions, outsourced services and contractors from its workforce of 60,000. This comes just a year after Sprint cut 5,000 positions.

Sprint will also close approximately 125 out of 1,400 company-owned retail locations amid the loss of more customers to rivals such as AT&T and Verizon Wireless.

Sprint said it expects the restructuring to reduce internal and external labor costs at an annualized rate of $700 million to $800 million by the end of 2008. Its reductions will be complete in the first half of this year.

Earlier this month, Sprint made strides in its wireless network initiative by announcing new Xohm mobile Internet business agreements for Web portal services and WiMAX network access devices.

In August, Sprint said it planned to sink $2.5 billion into its WiMax infrastructure through the end of 2008, with another $2.5 billion by the end of 2010.

The company expects Xohm/WiMax services will produce between $2 billion and $2.5 billion in annual revenue by 2010.

It is obvious that Sprint needs to hone its strategy, improve customer relations and execute in the marketplace.

The company plans to walk investors through its fourth-quarter and full-year 2007 results on Feb. 28, a Sprint representative said.