As part of its effort to turn its fortunes around, wireless phone company Sprint Nextel announced today that it will "streamline its business" by cutting 4,000 jobs and closing 8 percent of its stores.
The company, third among U.S. mobile-phone services, has been battling a continual loss of subscribers.
Saving as Much as $800 Million
In addition to the cuts in company positions, which include both management and non-management positions, Sprint Nextel will reduce its utilization of outsourced services and contractors, and eliminate more than 4,000 third-party distribution points out of a total of 20,000. The 8 percent reduction in stores is about 125 company-owned retail locations, out of a total of nearly 1,400.
The employee reductions are expected to be completed in the first half of this year. Employees will be offered a voluntary separation plan, with separation pay and outplacement services.
The company expects the cutbacks to save as much as $800 million through the end of this year. The cost-cutting measures are intended to reduce the company's losses, even as it reported a net loss of 683,000 post-paid subscribers, considerably more than observers had predicted. The company also has had a variety of customer  -service woes and bad press.
In the summer, for instance, the company came up with a unique way to handle customers who made too many calls to customer support -- it fired them. At the end of June, it sent letters to about 1,000 subscribers, saying their service had been terminated because of the number of inquiries they made to customer service.
Long Time Coming
Sean Ryan, an analyst with industry research firm IDC, said this belt-tightening "has been a long time coming." He added that Sprint Nextel had issues of customer service and network quality that were causing it to lose customers while its competitors were adding them.
Bill Ho, an analyst at Current Analysis, said the company "better have a turnaround or growth plan" to accompany the cost cutting, because they haven't stabilized the business.
Ho, along with Current Analysis analyst Avi Greengart, said that, as consumers, they have no idea why they should pick Sprint as compared with other major carriers. They noted that Verizon's marketing message is the network; AT&T 's is that it is the biggest and has the iPhone; T-Mobile is that it's the cheapest and is youth-oriented; but Sprint's is not clear.
Ho also said the reductions don't answer other questions about Sprint's strategy for improvement.
For instance, do these reductions affect its plan for a broadband mobile Internet WiMAX service, scheduled to be released in the spring? And how will it deal with its "subprime customers?" These are customers that have poor credit histories and tend not to pay their bills on time, and, Ho said, were "the start of Spint's demise and have been a thorn in their side."
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