Sprint teams with Ericsson in $5B network services deal

The deal lasts 7 years and can be extended

Sprint Nextel Inc. announced today a seven-year deal with Ericsson for network services that is valued at up to $5 billion and can be extended.

The agreement means that 6,000 Sprint networking employees will begin working for Ericsson in the third quarter of the year, Sprint said in a statement. They will be a part of Ericsson Services Inc., an Ericsson subsidiary in Overland Park, Kansas, meaning the jobs will be retained in the U.S.

Sprint said no reductions in its workforce are currently contemplated as a result of the deal, which it said "delivers operational efficiencies." It did not elaborate on what those efficiencies are, but the company planned a conference call to discuss the deal at 1:30 p.m. ET.

In the deal, Sprint retains ownership of its network and controls strategy as well as its investment decisions. Sprint customers are going to be served by Sprint employees.

Ericsson, meanwhile, will assume responsibility for day-to-day services, provisioning and maintenace for Sprint's CDMA, iDen and wired networks.

Bob Azzi, senior vice president of network at Sprint, said in a video blog, that Ericsson is expected to make a $130 million investment to do the network services work on the Sprint network. That investment means Sprint can redirect efforts to improve its network coverage and network quality, Azzi said. By using the resources of up to 30,000 Ericsson employees globally, Sprint won't need to install a $20 million workforce management system, he added.

Overall, Ericsson provides network services to about 100 networks globally, serving 270 million subscribers, Azzi said. Ericsson won out over other major network services providers for Sprint's business because of the way it has worked with customers to standardize processes and bring innovation. Azzi said Sprint talked to several carriers in Europe who work with Ericsson and "in every case, they were very satisfied with Ericsson."

Enterprise customers of Sprint might wonder whether the Ericsson service will give them the same network performance they are used to, and Tim Donahue, Sprint's vice president of marketing, said with Ericsson, "performance levels are going to be as good if not better."

Copyright © 2009 IDG Communications, Inc.

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