Wednesday, January 28, 2009

Sprint continues to struggle

Sprint announced plans to eliminate 8,000 positions by the end of the current quarter--in an effort to trim $1.2 billion in internal and external labor costs. The job cuts were intended to make its cost structure more competitive in the industry and keep the company fiscally secure in the current economic downturn.

While many companies are trying to cut costs during the recession, wireless is one of the few areas where most operators don’t appear to be struggling. Sprint has the double misfortune of facing not only a bad economic climate but the task of simultaneously trying to rebuild its reputation and business among customers, said Jeff Kagan, an independent wireless analyst. “We have seen wireless competitors like Verizon and AT&T continue to do pretty well during this weak economy, but Sprint has continued to lose customers and struggle.”

In the third quarter, Sprint reported net customer losses of 1.3 million, adding to the tally of customers fleeing for other operators. Sprint’s customer base has shrunk 6.3% in the last year, while the industry overall has grown 7%. Meanwhile Sprint’s operational costs have remained fixed as it maintains a network, sales and customer care operation intended to support a much larger customer base.

The biggest concern for Sprint right now, Moffett added, must be the viability of its Nextel iDEN network, which Sprint recently tried to revive. If Sprint can’t reverse customer losses on the iDEN network, it could move from being a cash-generating network to a cash-losing one, compounding Sprint’s problems. “If the volumes on the iDEN network are no longer sufficient to support Nextel, then the hole Sprint is in will be much deeper than we thought.”, said Craig Moffett, senior analyst with Bernstein Research.

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