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Sprint inks $5B network outsourcing deal with Ericsson
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Confirming months of rumors and speculation, Sprint Nextel and Ericsson announced a seven-year outsourcing deal valued at up to $5 billion and involving 6,000 Sprint employees. Under the agreement, Ericsson assumes responsibility for the day-to-day services, provisioning and maintenance of Sprint's CDMA, iDEN and wireline networks, though Sprint made sure to point out that it "retains full ownership and control of its network assets, and solely owns network strategy and investment decisions."
And, presumably to highlight the enormity of the agreement, the companies gave a name to the deal: "Network Advantage."
"No other U.S.-based carrier has followed through on the business-enhancing vision inherent in Network Advantage," said Sprint's Steve Elfman, president of network operations and wholesale. "Our best-ever network performance will become even better by leveraging Ericsson's world-class leadership in network services, their proprietary tools, and the knowledge of more than 30,000 dedicated and highly-specialized service professionals to power Sprint's Now Network."
The announcement also means that the mechanics of Virgin Mobile USA, Boost Mobile and other brands that run through Sprint's network will be handled by Ericsson.
Sprint investors seemed pleased at the news, sending the carrier's stock up by more than 5 percent in the minutes after the announcement. Ericsson's stock remained unchanged.
"The North American telecom market has finally cracked. Sprint's $5 billion deal with Ericsson is a game changer that challenges ingrained perceptions of what is core and non-core to telecom operator's business activity," said Yankee Group analyst Camille Mendler. "Until today, North American telecom operators had proved unwilling to outsource network functions on such a large scale. That said, North American operators are well acquainted with outsourcing: Between 2002 and 2008, extensive outsourcing of functions involving business administration, IT and customer service has already occurred. But externalizing the operation of physical network plant has largely been excluded until now."
However, not all wireless industry players see outright network outsourcing as a viable strategy: Verizon Wireless' CTO said earlier this year that "I am not a believer in (network) outsourcing."
Ericsson is no stranger to the network outsourcing game; the company handles operations of more than 100 other networks covering a total of 275 million subscribers around the globe. Indeed, wireless giant Vodafone signed an outsourcing deal with Ericsson ("managed services" in Ericsson parlance) in 2007 covering supply and distribution of spare parts for its mobile networks across Germany, Spain and Portugal.
As for Sprint's new deal with Ericsson, the agreement includes several key stipulations:
- Customers will continue to work directly with Sprint employees as their primary contact, as Sprint retains full control of the customer experience, customer technical support and services review.
- Sprint retains technology and vendor selections.
- The transferred Sprint employees will become part of Ericsson Services, a wholly-owned Ericsson subsidiary based in Overland Park, Kan., a move that "retains jobs in the United States," according to the companies.
Further, the two companies said that "no force reductions are currently contemplated as a result of this agreement."
The announcement brings to a close months of speculation that Sprint would outsource its network to Ericsson, the world's largest supplier of telecom equipment, following several disastrous quarters at the nation's third largest carrier where customers departed by the millions.
For more:
- see this release
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Comments
Posted by Anonymous | July 9, 2009 - 12:55pm
I guess Sprint now understands what everyone else in telco knows; they don't have the expertise or leadership to operate wireless networks.
Posted by goodbye_employees | July 9, 2009 - 1:32pm
I would start looking for a job if I were a Sprint/Nextel employee. Outsourcing means deep cuts to improve margins.
Posted by Anonymous | July 9, 2009 - 1:40pm
I think is a good opportunity for sprint ops personnel, because their well being is not hinged on a flondering US wireless carrier, but now a multinational and diversified equipment giant.
Posted by Martin | July 9, 2009 - 2:43pm
It's ironic that Sprint is very much like an MVNO now.
Posted by Anonymous | July 9, 2009 - 3:26pm
Idiots all of you! This is a fantastic move for Sprint. Sprint retains ownership and all customer interaction while atthe same time making the networks more efficient and cost effective. They can know spend more time and resources on the customers and growing the business. This is a BOLD move from a company on the rise.
Posted by Anonymous | July 9, 2009 - 3:46pm
What about Ericsson getting access to the other vendors confidential and proprietary information?
The lawsuits will be flying....
Another dumb move from the dummies at Sprint.
Posted by Spawn of some baby bells | July 9, 2009 - 7:21pm
I think this is a great move for Dan Hesse's friends at AT&T wireless and Verizon.
Sprint Management has proven for the UMPTEENTH time that not only can they NOT run a wireless company, but they can't run a wireless network.
Look at Sprint's stock price today, just a seventeen cent rise in stock price (which sadly equates to 3.96% of the share price because it's so low) from just a "large change". Again, another one of Dan Hesse's "nukes" proves to be less than a fire cracker!
Sprint should look to divest itself from it's frivolous spending, like when Dan Hesse flew 100+ private guests to a NASCAR race in Sonoma California, absolutely pee-ing away bottom line dollars, while cutting heads to save dollars....
I'm so glad I quit that wretched place.
The best thing Sprint can do is try to stay afloat with horrible decisions like this, it's better than watching the MJ funeral.
Posted by Anonymous | July 9, 2009 - 7:59pm
Let me guess, after the announcement the wireless industry's highest paid execs will go and reward themselves with yet another bonus and then after a year when their outsourcing idea flounders (5th attempt to outsource a business unit at Sprint), they get terminated and get another bonus by way of a severance package.
That's the Sprint way and it's deja-vu all over gain.....
Posted by Anonymous | July 9, 2009 - 11:22pm
I wonder how much the unemployment rate will drop, in India. You can see the writing on the wall. I was contemplating switching my wireless to Sprint, not now.
Posted by Anonymous | July 10, 2009 - 1:07pm
The problem is and will always be MANAGEMENT at Sprint Nextel E&O group. Outsourcing to Ericsson does not change much because the SAME morons that have been running E&O into the ground are the SAME morons at the helm at the new Ericsson Sprint Nextel group. Nothing has changed but the NAME! The way I see it "Sprint Nextel" now does not have to deal with the problems of E&O and now Ericsson does. As an employee of both these companies I can flat out say that if my new employer wants to make this work they MUST START FIRING MANAGERS AND DIRECTORS NOW! Ericsson should work to replace 99.9% of all the managers ASAP! It was bad, poor, just down right STUPID and unqualified managers that drove us to this point. The MORONS in KC could never figure this out. Ericsson MUST start cutting the massive and bloated management NOW! My current manager is in fact part of why this merge has failed. My current manager is in the WRONG job! He has NO manager SKILLS at all, he has driven good people and top notch people away. He has caused a few to leave and go to work at ATT and VZ and over there they are TOP employees. My manager is the NORM at Sprint Nextel, now Ericsson. I will stick around with hopes Ericsson will cut, cut, CUT all these bad managers ASAP and cut my manager too. There is NO reason this man or his boss should be left in place. Both of them have caused "Sprint Nextel" to FAIL! ERICSSON are YOU Listening? You better be or you are going to fail too, just LIKE Sprint Nextel DID! Sprint Nextel REFUSED to do what was needed, REPLACE THE MANAGEMENT!!!!!!
Posted by Apocalypse Now | July 15, 2009 - 6:29pm
umm - but doesnt anyone notice what is truly happening here. stop whining about your poor selves and how chitty your current life is, in this industry. recognize that with the current presidency, deregulation, and innovative forward thinkers, identifying the next step was known several years ago. this simply means - get out your notebooks people and mark your calendars, that the next dot com - the virtual dot com is arriving on a global scale, finally. id say sometime next year, we should see a tremendous rise in communication and connection between overseas and the core elements that run this nation. get ready to fasten your seatbelts and make some money. finally the sorry scrubs that whine about their current management or even company, will get the pink slip and feel even more lost, while the rest of us more versatile, resilient, ready for change individuals, will be rewarded in the soon to come. cheers everyone - Lets do a Northpoint all over again!
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