This was originally posted at ZDNet's Between the Lines.
Sprint Nextel will outsource its network to Ericsson in a seven-year deal valued at $4.5 billion to $5 billion.
The deal, announced Thursday, allows Sprint to offload the costs associated with running its network. Sprint will transfer 6,000 employees to Ericsson.
Ericsson will now handle all the day-to-day operations and maintenance. The transfer of the network and the employees that go with them is set to happen by the end of the third quarter.
Steve Elfman, Sprint's president of network operations and wholesale, said on a conference call that Sprint still owns its network and is responsible for strategic plans and investments. Elfman added that the goal is to improve the quality of the network and deploy next-generation technologies. Sprint will keep its customer service operations.
Sprint didn't disclose exact numbers on savings. Elfman said Sprint expects to cut cost per labor unit. Sprint will also avoid investment in the tools that Ericsson already has. Economies of scale will enable Sprint-Ericsson to cut costs on software licenses and other expenses. Those savings will be invested in expanding network coverage.
Among other key parts of the deal:
• Sprint chooses technology platforms and vendors.
• Ericsson maintains Sprint's wireless and wireline networks.
• Ericsson will optimize Sprint's inventory of network assets.
• Ericsson and Sprint will focus on improving processes.
• No layoffs are anticipated due to the deal and Ericsson will set up shop in Overland, Kan., Sprint's headquarters.
In an effort to cut costs, Sprint Nextel may outsource management of its cellular network to equipment vendor Ericsson and transfer 5,000 to 7,000 U.S. employees to that company as part of the deal.
That's according to The Wall Street Journal, which quotes sources familiar with the matter as saying the beleaguered cell phone operator could end up paying Ericsson as much as $2 billion over several years to maintain the thousands of cell sites that carry Sprint's wireless voice and data traffic. The WSJ quotes those sources as saying the deal could slash Sprint's network costs by about 20 percent.
Alcatel Lucent and Nokia Siemens reportedly also bid for the outsourcing contract. Both Sprint and Ericsson declined to comment on the deal, which could involve some layoffs, according to those close to the situation, but which has not yet been finalized.
While outsourcing has become more common among telecom operators in Europe and Asia, the WSJ notes that in the U.S., operators have preferred to take care of day-to-day network management on their own.
Negotiations on the possible deal come as Sprint, the third-largest wireless operator in the U.S., continues its struggle to compete with market leaders AT&T and Verizon Wireless in attracting and keeping customers.
In January, the Overland Park, Kan.-based company announced plans to cut approximately 8,000 jobs. Its fourth-quarter earnings announcement in February brought mixed news. While the company narrowed its losses considerably compared with the prior year, its continued subscriber losses led to declining revenue.
The company is scheduled to report earnings Monday morning, with a bright spot expected to be the success of Boost Mobile's prepaid wireless service, which is owned by Sprint. Many observers are also waiting to see what kind of boost Sprint will get from its exclusive agreement to sell Palm's eagerly awaited Pre--whenever the phone finally arrives.
- prev
- 1
- next
