Sprint Nextel axes 8,000 jobs

Sprint Nextel, the beleaguered number three mobile operator in the US, is cutting 8,000 jobs, or around 14 per cent of the company’s workforce.

Sprint aims to save $1.2bn a year by reducing its labour costs, although it will take a charge of $300m during 1Q 2009 for severance and related expenses associated with the reduction.

“Labour reductions are always the most difficult action to take, but many companies are finding it necessary in this environment,” said Dan Hesse, Sprint Nextel CEO.

It is true that Sprint is not alone in making drastic workforce reductions as the credit crunch bites across different industry sectors. This week in the US alone, Caterpillar Inc, the world’s largest supplier of construction equipment, announced a massive cut of 20,000 jobs; Home Depot chipped in with a 7,000 reduction; Philips Electronics said 6,000 jobs had to go; and Texas Instruments  has slashed 3,400. At General Motors, the struggling US car manufacturer, a further 2,000 jobs have been cut.

Rival US operator AT&T said last month it would be cutting its staff by four per cent (12,000 jobs).

But Sprint Nextel does appear more vulnerable than its mobile operator rivals. Analysts point out that the operator is losing around one million subscribers per quarter and that annual revenue is dropping at double-digit rates. Sprint Nextel has been plagued for some time with complaints about poor network performance and customer dissatisfaction. (Kathy Walker, Sprint’s chief information and network officer, is one of the 8,000 to lose their job, effective 31 March 2009).

The deadline for dept repayments is also creeping up on Sprint: $600m of debt is due on May 2009 and $2.4bn in 2010. At the end of 3Q 2008, however, Sprint said it has a cash balance of $4.1bn and it expected to generate free cash flow in 4Q 2008

To assist in its cost reduction efforts, Sprint says it has no plans to acquire new capital in the next two years. It says it will also extend a 2008 suspension of salary increases through to 2009.