Sprint (NYSE: S) plans to cut thousands of more jobs as part of its effort to slash at least $2 billion in operating expenses from the business, according to Sprint Chairman and SoftBank CEO Masayoshi Son. Sprint CEO Marcelo Claure said he has been very direct with employees about the need to slash costs in a bid to get back to profitability, something Sprint hasn't really achieved in 11 years.
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Son said he is confident in Sprint's turnaround progress but acknowledged that it needs to make deep cuts. "Sprint is now in the position to increase the pace of user acquisition while cutting costs," Son told reporters in Tokyo as SoftBank reported quarterly earnings, according to Bloomberg. "We will also cut staff. The cuts will be in the thousands."
"I think $2 billion is a minimum target, and we should go even deeper. We need to do this, including reduction of personnel," Son added, according to The Wall Street Journal.
Sprint CFO Tarek Robbiati said yesterday, after Sprint reported its fiscal second-quarter results, that the carrier expects to book between $1 billion and $1.2 billion in one-time costs as part of its cut to operating expenses for the remainder of fiscal year 2015 and over fiscal year 2016.
In November 2014 Sprint announced it would cut 2,000 jobs as part of a round of $1.5 billion in cost reductions. Those cuts came on top of the 5,000 jobs Sprint cut from January through mid-September 2014. Sprint had 31,000 employees as of March 31, and the wireless business had about $26 billion in costs in the year ended March 31.
Sprint plans to make the new job cuts by next year, but Claure has vowed to leave "no stone unturned here" in an effort to slash costs. That means no more free water bottles and yogurt for employees, and executives will need to take Uber rides or regular taxis instead of limos with drivers for business trips. Sprint also plans to cut down its roaming costs as it continues to densify its network and plans to set up leasing vehicles off its balance sheet to finance the purchase of handsets and network equipment.
However, Claure wants to make the job cuts by the end of January 2016 to give existing employees a more generous severance check. Sprint plans to offer employees one week of severance pay for a year worked at the carrier instead of two weeks of pay for every year of employment. The cut in severance pay will happen only if the employees are notified after Jan. 30, 2016. The package will take effect when employees are notified of their last day of employment.
"I think we had a very generous severance compared to other companies," Claure told Re/code. "We are bringing it to a more realistic level."
To keep morale up inside the company, Claure said he is being upfront with the carrier's staff. "Nobody likes to be in a company that is doing layoffs," Claure told Re/code. "The way you beat that is being very honest and transparent."
Despite the looming cuts, Claure has cause for optimism. The company said yesterday that Sprint platform churn in the third quarter was once again at a record low of 1.54 percent, compared to 2.18 percent for the year-ago period and 1.56 percent in the second quarter.
Sprint reported that it gained postpaid handset customers on the Sprint network in the third quarter, the first time it had done so in a full quarter in more than two years. During the quarter, 199,000 prepaid customers with consistent payment history migrated to Sprint's postpaid service. Sprint added 237,000 postpaid phone customers in the period, compared to net losses of 500,000 in the prior year quarter, an improvement of 737,000 year-over-year. Excluding migrations from prepaid, postpaid phone net additions would have been 38,000.
"If this is a marathon, we are one-third there," Claure told CNET.
Sprint is also seeing more improvement in its network, especially as it deploys two-channel carrier aggregation on its 2.5 GHz spectrum, which produces wider channels and faster speeds. Sprint has done so in around 80 markets across the country so far and now as 12 devices capable of accessing the technology.
Son had once thought of abandoning SoftBank's investment in Sprint following his failure last year to combine with T-Mobile US (NYSE:TMUS). However, last week Son bought a house in the same Kansas City, Mo., neighborhood as Claure, and plans to hold monthly meetings at Sprint's headquarters in nearby Overland Park, Kan., instead of California, and stay in the house while he visits.
"That's a commitment to Sprint, that we're going to do this together in the next few years to turn around Sprint," Claure told the Kansas City Star. "Nobody would buy a house if they were intending to sell Sprint or if they didn't have an intention to stick around."
For more:
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Re/code article
- see this Kansas City Star article
- see this CNET article
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