Sprint Nextel Will Layoff 5,000 After Loss Of Subscribers

Sprint had a net loss of 300,000 subscribers in the last quarter, and its stock promptly plunged 10% on the news.

By W. David Gardner
InformationWeek

Jan 9, 2007 01:19 PM

Sprint Nextel, still struggling to digest the merger of the two companies while forging ahead with advanced wireless technologies, announced it had a net loss of 300,000 subscribers in the last quarter and plans to lay off 5,000 employees. The company's stock promptly plunged 10% Tuesday on the news.

Gary D. Forsee, the company's chairman and chief executive, said the company continued to experience "decreased demand" for its integrated Digital Enhanced Network as well as "increased churn" of subscribers. Subscribers to iDEN typically used Nextel services on a hodgepodge of spectrum that Sprint, the dominant company in the merger, is attempting to meld together.

"We expect the widespread introduction of our first combined CDMA-iDEN phones and improvements in iDEN network performance to benefit push-to-talk subscriber trends," said Forsee, attempting to put a positive spin on the firm's financial statement.

While the company brags about the 2.5-GHz spectrum it picked up from Nextel in the merger, Sprint Nextel has been challenged to bring Nextel subscribers, many of whom utilized older public safety bands, over to the new networks.

Sprint has an ambitious deployment of 3G and 4G networks under way and has enlisted major partners Motorola, Samsung, and Nokia in the effort. Forsee acknowledged the challenge that faces the company. "In the near term," he said, "a lower margin revenue mix, investment of an additional $1.1 billion in our business operations, and startup costs associated with the build-out of our fourth-generation WiMax wireless network will pressure profitability."

The company is racing to attempt to staunch the flow of Nextel iDEN customers while seeking to sign up customers for the advanced wireless networks Sprint hopes to have in place in the coming months. Forsee noted that the company is the first U.S. mobile phone service provider to begin deploying CDMA2000 EV-DO Rev A, an advanced wireless infrastructure provided by Qualcomm.

In its financial outlook update, Forsee said Sprint Nextel expects to report operating revenues of $41 billion for 2006. "We will continue to adjust our cost structure," Forsee said, "which will include a workforce reduction, as we meet the changing demands of the business."