Citing an internal memo circulated this week, The Wall Street Journal reports Sprint, the U.S. carrier owned by Japan’s SoftBank, is planning $2.5 billion in cost cuts over the next six months, which will include job reductions and a hiring freeze.
The report said the memo, from CFO Tarek Robbiati, indicates such extensive cost-cutting measures “inevitably will result in job reductions. The main thing to consider when requesting to spend money is to take an owner’s mindset by treating every dollar as if it were your own.”
Sprint CEO Marcelo Claure hinted at the move in comments made last month at the Goldman Sachs-hosted Communicopia event. His comments addressed cost cutting, network improvement and gaining market share.
Claure said Sprint has already cut $1.5 billion in costs under his tenure and, looking forward, “We’re committed to basically doing the same or more. We definitely have to take cost out.”
Wells Fargo Senior Analyst Jennifer Fritzsche said the announcement “is not overly surprising given the company’s weaker margins [vs.] the peers, the amount of the cut is a significant amount. To put it in perspective, $2.5 [billion] represents [one-third] of the company’s operating costs. As we have written in the past, Sprint is very much a ‘show me’ story. While we view this as a positive step in the right direction, we believe the market will give it very little credit for such a move until we see tangible evidence of costs coming out of the model. There are opportunities on the roaming and special access side that we believe could see some movement in 2016.”
Sprint had around 31,000 employees in March. The carrier started the year as the No.3 U.S. carrier, but has since been passed by T-Mobile US, which has taken a very aggressive approach to marketing and promotions that encourage customers to switch from rival carriers.
While apparently focused on cutting costs, Sprint has forecasted big expenditures related to network densification and improvement based on deployment of thousands of small cells. Some analysts have predicted deployment of up to 70,000 small cells.
Mobilitie is expected to be a primary partner for Sprint, charged with securing the sites and negotiating terms for deployment. Deployment of 70,000 outdoor small cells will require the acquisition of roughly the same number of discrete sites. Operators typically look for utility poles, lamp posts, church steeples and other structures that rise above most roof levels. Most sites will require zoning, permitting and negotiations with municipal authorities.
