Sprint to take on some Ericsson employees as companies renew parts of network-outsourcing pact

Ericsson (NASDAQ: ERIC) said today it has renewed parts of its managed services partnership with Sprint (NYSE: S), extending portions of a seven-year, $5 billion contract that was set to expire in September.

The new agreement will see some Sprint take on some Ericsson employees, but exactly what work Ericsson will continue to do on Sprint's network – and how much money the new deal is worth – remains unknown.

"Going forward we've decided to renew portions of our managed services work with Ericsson when the current contract reaches its full term in September," Sprint CTO John Saw wrote in a post on the company's blog. "Ericsson will provide some multi-vendor services that support the ongoing operations and development of our network, while overall Network Service Assurance will be performed by Sprint. As a result, some Ericsson employees will transition to Sprint, while others will remain with Ericsson."

The network-outsourcing pact was initially announced in July 2009, with Sprint transferring 6,000 employees to the Swedish gear vendor and Ericsson taking over day-to-day operations of the CDMA, iDEN and wireline networks. The outsourcing arrangement, which was big enough to merit its own name – the companies dubbed it "Network Advantage" – was hailed as a "game changer" at the time by one analyst.

FierceWireless asked both companies about the status of the deal earlier this month, but both declined to address the question directly. Sprint likely cut back Ericsson's role substantially as it continues to look to cut costs in its network operations and elsewhere across the company.

"We've been clear that we're going to do things differently at Sprint," Saw continued. "And we have very aggressive goals to lower costs while at the same time improving our network and executing our densification and optimization strategy. With our diverse toolkit of innovative cell site solutions and our deep spectrum holdings, we're very confident in our ability to drive network improvements while reducing costs.

"Being closely connected to our network and our customers is a key aspect of Sprint's turn-around strategy. Therefore, this is the right time for Sprint to take on more direct responsibility for its operations."

The carrier raised eyebrows in May when it lowered its capex guidance for the rest of the year to $3 billion, down significantly from analysts' estimates in the range of $4.5 billion. And this week Sprint again surprised analysts when it said it spent less than $500 million on its network during the most recent quarter.

Meanwhile, Ericsson continues to struggle as carriers in mature mobile markets have largely completed LTE buildouts and are preparing to invest in 5G over the next several years. The company ousted CEO Hans Vestberg earlier this week after it posted net quarterly profit of $186 million, down from $240 million during the year-ago period. Sales fell to $6.3 billion, missing analysts' predictions of roughly $6.44 billion, Bloomberg reported.

For more:
- see Ericsson's press release
- read John Saw's blog post
- check this RCR Wireless News report

Related articles:
Ericsson ousts Vestberg after 26% drop in net sales
Sprint's lowered capex guidance - from $4.5B to $3B - concerns investors, despite $11B in liquidity
Sprint, Ericsson mum as time apparently winds down on milestone network outsourcing pact

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