Sprint to take $165M charge for job cuts

Sprint (NYSE:S) said it will book a $165 million charge in the fourth quarter related to job cuts, but did not reveal how many employees it plans to cut as part of a restructuring.

In a filing with the Securities and Exchange Commission, Sprint said that on Jan. 16 it started to implement a "workforce reduction plan to reduce costs and better meet the changing dynamics of the marketplace." The company said the cuts are expected to be largely completed by June 30, and will include management and non-management positions.

Sprint said the charge will be for severance and related costs, but that "additional material charges are expected in future periods associated with" the cuts.

A Sprint spokesman told the AP the company's managers are still reviewing how many jobs they will need to cut. However, according to the Kansas City Star, Sprint executives said last week the company would eliminate an undetermined number of jobs during the first half of this year. The report said the layoffs include 300 to 500 jobs at less profitable retail stores Sprint plans to close and the report said other areas that are expected to be affected include customer care centers, business sales and other areas.

Sprint employed around 39,000 people as of the end of 2012. Wells Fargo analyst Jennifer Fritzsche wrote in a research note that the cuts are likely long "overdue" if Sprint is to expand its profit margins. In a research note to clients she wrote that the cuts likely reflect the "somewhat inflated" cost structure left over from Sprint's 2005 merger with Nextel.

"While the human element of such moves is indeed difficult, we believe this reduction was likely overdue and needed," she wrote. "We continue to believe Sprint/SoftBank is making many under-the-radar moves to improve its overall cost structure."

Sprint will report its fourth-quarter earnings on Feb. 11. Sprint posted a net profit of $383 million in the third quarter, its first quarterly profit since 2007.

The filing comes amid continued speculation that Sprint parent SoftBank has engaged in direct talks with T-Mobile US (NYSE:TMUS) parent Deutsche Telekom to try to iron out a deal between Sprint and T-Mobile. Last week the Wall Street Journal reported that at least two banks have provided Sprint with proposals for financing a takeover of T-Mobile. Sprint and T-Mobile have declined to comment on the speculation.

For more:
- see this SEC filing
- see this AP article
- see this WSJ article (sub. req.)
- see this Reuters article
- see this Kansas City Star article

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