Sprint Friday said it was instituting a number of cost-cutting measures, including terminating 1,400 employees and shutting down 55 retail stores and 150 in-store retail repair centers. The cuts are aimed at helping the No. 3 wireless carrier recoup nearly $1.6 billion in losses reported in the fourth quarter of 2013.
Sprint business partners say the cost-cutting moves are tough medicine, but they are required as the company continues to spend billions of dollars to modernize its wireless network and adjusts to an evolving wireless marketplace that includes shorter handset life cycles and a multitude of new online and retail outlets to buy Sprint products.
"Sprint is future-proofing its business model," said Tem Wu, director of wireless at WTG, a Malibu, Calif.-based Sprint Authorized Business Representative and telecom master agent. "Everything is in flux at Sprint right now. But there are huge upsides to what Sprint is doing. In 2015 Sprint will be well positioned with a better rate plans, business solutions and wireless network."
In a statement, Sprint said the cuts would help move the company toward the goal of sharpening its "focus on sales execution and increasing sales productivity." A Sprint spokesperson declined to comment on what the layoffs' impact would be on channel partners.
Last year, Sprint was acquired by SoftBank, a Japanese-based telecommunications company, in a $21.6 billion deal. According to Jeff Kagan, an independent technology analyst, the changes and cuts at Sprint are at the behest of SoftBank's CEO Masayoshi Son, who is committed to making painful short-term changes for long-term growth.
"The telecommunication industry gets turned upside down every seven years," Kagan said. " Masayoshi Son and Daniel Hesse [Sprint CEO] are in the process of ripping out the vestiges of Sprint and rebuilding it."
Sprint, with 55 million business and individual customers, also operates the Boost Mobile and Virgin Mobile subsidiaries.
"Reductions come as the result of greater efficiencies that we've achieved through simpler pricing plans and improved customer service -- which have resulted in fewer calls to customer service -- as well as adjusting to changing marketplace dynamics," said Sprint in its statement.
While most partners and analysts interviewed say the layoffs are necessary evils, some industry experts are not so optimistic.
"These cuts are not a big surprise given the profit pressures that SoftBank has had on Sprint ever since a merger was announced in July," said Zeus Kerravala, founder and principal analyst with ZK Research. "Sprint is still a healthy company, but what we are seeing now signals a streamlining of the company for possible acquisition or merger with T-Mobile," Kerravala said.
In December Sprint reportedly was in talks to acquire T-Mobile in a deal that observers said could help the two carriers gain some significant ground on U.S. market leaders AT&T and Verizon.
According to a report from The Wall Street Journal citing people familiar with the matter, Sprint could launch a bid for T-Mobile in the first half of this year. The deal could be valued at more than $20 billion, according to sources.
Kerravala said despite Sprint's claims that cuts won't impact customer support, the wireless carrier could face partner and end-user defection should support suffer. "Wireless customers are very fickle," he said. If Sprint's cuts translate into disruptions or hindrances for customers, Kerravala said, then there is a real risk that SoftBank pressures for profitability could backfire into a Sprint financial meltdown.
PUBLISHED MARCH 21, 2014