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Update: Sprint to lay off 8,000 by April

Wireless carrier expects to save $1.2 billion

By Matt Hamblen
January 26, 2009 12:00 PM ET

IDG News Service - Sprint Nextel Corp. today said that it will lay off about 8,000 workers by April within "all levels" of the company.

The reductions should reduce labor costs by $1.2 billion, the company said. About 850 of the layoffs are expected to be eliminated through a voluntary separation plan begun last year. The company employs a total of 56,000 workers.

The company posted a net loss of $326 million in the third quarter of 2008 and a net loss of nearly $1.2 billion for the first three quarters of 2008. Sprint Nextel, which plans to release its fourth-quarter numbers on Feb. 19, lost 3.5 million mobile-phone customers between the third quarter of 2007 and the third quarter of 2008.

CEO Dan Hesse said the reductions were necessary, even though the carrier has made improvements in customer service that have resulted in higher satisfaction ratings in customer surveys. Head-count reductions in customer-care functions will be less than those in groups that don't interact with customers, he added.

The carrier also said it will suspend the 401(k) matches for workers for 2009 and extend a freeze on annual salary increases started in 2008 through 2009. A tuition-reimbursement program was also suspended.

Sprint has about 51 million customers and is the third-largest wireless and wired carrier in the U.S.

Later, Sprint spokesman James Fisher confirmed earlier reports that Kathy Walker, Sprint's chief network officer, will leave Sprint at the end of March since her position was eliminated as part of today's layoff news. He said that Walker and Steve Elfman, the senior vice president of network operations, will be working on a management plan for networks and IT in coming weeks. "We are committed to maintaining the high quality of our networks," Fisher added.

Gartner Inc. analyst Phillip Redman said Sprint has been on a downward "spiral for years," adding that integrating Nextel was a major cause. But the biggest cause is that Sprint has struggled to find a strategy that differentiates it from competitors.

The "desire to be all things to all people has caused much of its problems as competitors have pulled ahead with stronger and broader offerings," Redman said. "Sprint needs to define its strength in the market, focus on those customers and improve its service. Unfortunately as it turns down call centers, lays off people and continually reorganizes, it [falls] further behind."

Problems with Sprint's financial numbers started years ago, and the poor global economy is "keeping Sprint down," despite improvements in the first half of 2008, said Jeffrey Kagan, an independent analyst. Hesse was hired more than a year ago, and a strong focus on customer service to prevent subscribers from defecting seemed to be working, he added.

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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