Sprint Nextel to cut 4000 jobs after reporting more subscriber losses

Jan 18, 2008 1:53 PM, By Donny Jackson

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Sprint Nextel today announced about 4000 job cuts and retail-outlet closures in the wake of more subscriber losses during the fourth quarter of 2007.

During the quarter, Sprint Nextel lost 683,000 post-paid subscribers and 202,000 of its traditional pre-paid customers, which offset subscriber gains the company realized through its wholesale channels—a trend that has existed during most quarters since Sprint merged with Nextel in 2005. Amid customer concerns regarding voice quality on the iDEN network, subscriber losses led to the ousting of former CEO Gary Forsee, who recently was succeeded by Dan Hesse.

Projecting continued losses in 2008, Sprint Nextel announced plans to streamline the company that include about 4000 job reductions during the first half of the year and cutbacks in outsourced services and contractors. The company expects to eliminate about 20% of its total distribution points, including 4000 third-party locations and 125 company-owned retail centers.

In a press release, Sprint Nextel projected the cuts will save the company more than $700 million per year. Historically, Wall Street has welcomed news of job cutbacks by bolstering the stock of companies making such announcements, but Sprint Nextel’s stock plummeted 25% in morning trading.

Regardless of Wall Street’s reaction, wireless industry consultant Andrew Seybold questioned the benefit of layoffs to Sprint Nextel. Even with its current headcount, the carrier is struggling to maintain its CDMA and iDEN networks while tackling two other major initiatives—the nationwide rebanding of 800 MHz spectrum and the initial deployments of WiMAX networks on 2.5 GHz spectrum.

“They took on too much … I think they’ve got to get back to basics,” Seybold said. “I’m not sure that layoffs or anything helps until they get back to basics and their customers feel wanted again. They need to take care of business and stop the bleeding on the Nextel network.”

Seybold said he believes Sprint Nextel’s total costs associated with 800 MHz rebanding will significantly exceed the $2.8 billion the company was required to make available for the endeavor. Meanwhile, Seybold indicated the carrier may only deploy WiMAX enough to satisfy FCC buildout requirements to let the company keep its considerable 2.5 GHz spectrum.

“When they’re saying [a reduction of] outsource service and contractors, that screams to me WiMAX construction,” he said. “I suspect Sprint’s going to put a hold on a lot of this [WiMAX] stuff. … All WiMAX does is bleed money at this point, because there are no real devices ready.”

Sprint plans to announce its fourth-quarter and 2007 year-end results on Feb. 28.