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Questions, concerns surround Sprint-Ericsson tie-up
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As the industry digests the mammoth, $5 billion outsourcing deal between Sprint Nextel and Ericsson, questions and concerns have arisen about the 6,000 affected Sprint employees, Sprint's network choices and the changing dynamics in the U.S. equipment supplier market.
Sprint sees value in the deal, naturally. According to Ovum's Jaw Dawson, the value of the deal over its seven-year course represents just over $100,000 per year for each of the 6,000 employees to be transferred from Sprint to Ericsson, "which suggests there could be significant savings overall."
Further, J.P. Morgan analyst Mike McCormack estimates savings between $35 million and $260 million over the course of the contract, according to the Wall Street Journal.
But Sprint employees are concerned for their jobs. Ovum's Dawson said the companies plan to transfer those 6,000 Sprint employees within the next three months, "which is an enormous and complex undertaking."
Sprint employees posted their concerns on The Kansas City Star's Sprint Connection Web site. One poster, Dago, said that layoffs should be expected "regardless of what sort of feel-good lies the Sprint execs may be telling now."
To be clear, two companies promised that "no force reductions are currently contemplated as a result of this agreement."
Apart from the actual mechanics and savings involved in the deal, the news also raises the question of what Sprint plans to do with its CDMA, iDEN and wireline networks that Ericsson will now oversee. The carrier did address one issue: a possible move to LTE. Sprint plans to use Clearwire's WiMAX network for high-speed mobile data, according to carrier executives quoted by the Wall Street Journal, and is not thinking of moving to the rival LTE standard.
Finally, Ericsson's appearance on the scene also raises questions about the vendor's future in the U.S. market. Already the company scored a major deal with Verizon Wireless to supply a portion of the carrier's forthcoming LTE network.
Ovum's Dawson offers perspective: "One of the most surprising aspects of the deal is that it was Ericsson, rather than Alcatel-Lucent, which won it. Though Alcatel-Lucent and one other vendor were part of the bidding process, Sprint selected Ericsson. ... Ericsson's relatively weak position in the U.S. generally and Alcatel-Lucent's position as a U.S.-based competitor with significant existing business with Sprint make the win all the more impressive."
Indeed, the situation may well benefit Ericsson's position at Verizon Wireless. Maynard Um at UBS wrote in a note to investors that "we expect Ericsson to use this as a loss leader into the Verizon LTE contract, where CDMA knowledge will be required for deployment and also it will be able to spread the resources across these two customers to lower costs."
For more:
- see this article from ChannelWeb
- see this WSJ article
Related Articles:
Sprint inks $5B network outsourcing deal with Ericsson
Sprint in 'final negotiations' on Ericsson outsourcing
Report: Sprint, Ericsson sign $2B network outsourcing deal
Analyst: Sprint network outsourcing deal not 'imminent'
Report: Sprint to outsource network management to Ericsson
Sprint Nextel to cut 8,000 jobs
Comments
Posted by Anonymous | July 10, 2009 - 12:40pm
More mgt. games, we have to start teaching U.S. execs how to run a business and stop teaching them how to play shell games until they destroy the company.
Posted by Anonymous | July 10, 2009 - 12:47pm
as far as i know, ericsson did not invest too much in 3gpp2 products, and i will be very surprised if they start now. where can they find products to put in the network
1) ALU
2) NSN/Nortel
3) Huawei
4) ZTE
5) Airvana
1-4 are ruled out. So I feel customers can expect them to not invest the bare minimum in the network. Sprint quality just became worse. I had a good impression about Dan Hesse, now not so sure...
Posted by Anonymous | July 10, 2009 - 1:33pm
Ericsson's managed services business seems to be apart from its infra biz and has a decent track record globally. It's logical that there is an equipment tie in but it appears Ericsson has global traction and credibility relative to other infra suppliers.
Posted by Anonymous | July 10, 2009 - 1:43pm
ericsson's managed services unit is seperate. agreed. but can they manage lucent/nortel gear better than those two...i am not sure how...
they started to do this india...do they put in competitors equipment there??
moreover in india, network quality plainly sucks...i believe this is becuase the outsources have *0* incentive into investing into a good network. at least in that case it was their own equipment... here it is their global competitors...
Posted by Anonymous | July 10, 2009 - 3:40pm
Welcome to the Sprint Now...err...Not Ours Now Network. Outsourcing only provides a cheaper solution, not a better one. What is Sprint's value proposition if not their network? Isn't that a wireless carriers largest asset? Ericsson is going to have to run as lean as possible and I'm sure that will include just keeping the network afloat. Never mind drive testing, adding capacity, generator backups, etc.
Posted by Anonymous | July 10, 2009 - 6:15pm
Yes, and it's going to get leaner. Another indication is that employees wages were kept exactly the same. No cost savings there! My guess is that they did not want to deal with the possibilty of a mass exit, which would immediately impact the network. They will now pick a time of their own choosing to transition the work overseas. Well played!
Posted by Spawn of some baby bells | July 10, 2009 - 10:01pm
So how does a company like Ericsson gain access to a competitors network infrastructure and it not be some sort of technology lawsuit from Alcatel-Lucent, Motorola, and even Nortel (NSN)?
Dan Hesse did the SAME thing with the Operations folks at AT&T wireless back in the late 90s, and it was a miserable failure for everybody.
I'm not saying this is a good thing or a bad thing, but Dan Hesse would sell off the entire company to make it profitable. Sadly, he's not a bad guy for doing that, he's doing his job because thats what the board tells him to do.
Also....
A significant amount of staff personnel were involved in the decision to outsource the network.
These people should be terminated, but not for that decision, but because they paved the road for themselves as well. Ethically speaking, i see a contradiction in how "right" a person or group is when they are making personal decisions and business with ones own self as the sole beneficiary.
Something to think about; pending layoffs for Ericsson employees. That's right, how many managers does Ericsson need? I'll tell you, a lot
less than Sprint had. I have never worked for a company where there were so many managers, and project managers that did nothing other than click boxes on a internal website, worthless beyond words!! Good news for the hard working empoyees that have kept that ship called Sprint sailing all these years. you WILL have jobs, and I'm sure Ericsson will take great care of the employees that have taken good care of the network, as well as offer them some excellent opportunities outside of their current roles and definitions. I hope Ericsson gets a chance to sweep out all the slackers and leaches, let me rephrase that, they WILL remove all the dead weight, as it will be the only path to profitability. Sprint can't run a company or a network, at least Ericsson can do one, let's see if they can do both.
Posted by Anonymous | July 12, 2009 - 6:38pm
I just ported 2 lines and an aircard from Sprint today. Goodbye Sprint and good riddance....
Sprint, sorry I met ya!!!
Posted by Anonymous | July 13, 2009 - 12:01pm
Ericsson will eventually reduce the staff working on the Sprint network, but they have no specific plans to lay-off workers. Ex-Sprint employees will leave as they always do after a major turnover in an outsourcing deal and some will be eventually repurposed to other Ericsson projects, as long as Ericsson can afford to do so. For now Ericsson is motivated to maintain the status quo in order to ensure the network continues to perform and any emergencies can be handled.
Ericsson has a strong track record of success in outsourcing and has made more investments in technoogy to support network operations than any other vendor. That is why they got the deal. They were simply percieved as the lowest risk provider. The outsourcing business is huge for Ericsson, their core business, and decoupled completely from any technology investments they are making on the infrastructure side.
Posted by Anonymous | July 16, 2009 - 4:26am
Maybe one of the most relevant questions would be How much does such a project cost for Ericsson ? Competitors left the race due to an unseen future profitability. Would be interesting to see where the project finance will be in 1 or 2 years from now...
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