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Sprint announces 2,000 more layoffs as revenues and high-value customers decrease

Sprint Corp. plans to lay off 2,000 more employees as part of its companywide cost-cutting efforts, its chief executive officer said Monday.

Marcelo Claure, who gained the top post 85 days ago, said the cuts come on top of 687 layoffs announced last month in Sprint’s network and information technology groups. Those jobs were in Reston, Va., and at its Overland Park headquarters, where 452 were let go.

In a call with analysts after Sprint released its quarterly financial results, Claure said, “While we have announced some reductions, our cost structure analysis indicates that regrettably we need to make some additional reductions.

“Today, we’re announcing we’ll be eliminating approximately 2,000 additional positions from our workforce. While difficult, this move is necessary for Sprint to compete in the marketplace.”

Sprint said it expected to save $1.5 billion a year from its cost-cutting campaign, including $400 million in labor costs. The job cuts began with 33,000 on Sprint’s payrolls, including 7,500 in the Kansas City area.

Sprint’s quarterly results unveiled Monday showed it gained subscribers overall but continued to lose high-quality phone customers who generate the most revenue. The result was a $765 million net loss and a 3.4 percent drop in total revenues during the quarter.

In an interview with The Kansas City Star, Claure said a letter notified employees Monday of the pending job cuts that will come from throughout the company’s operations and its footprint across the country. Managers have the lists of the employees who will be notified in the next few weeks.

“It’s pretty much everything. We have done a review of every single area in the business, ranging from the engineering group to the administrative side,” Claure said.

Managers had been told to identify — in jobs and budgets — the “bare minimum” needed to run the company, he said.

Claure said the job cuts and other budget cuts are needed because Sprint’s costs are “out of whack” with the rest of the industry.

“It’s been a difficult experience for a lot of people, but it’s one that’s strictly necessary to continue with a strong Sprint,” he said.

At the same time, Claure said Sprint will reopen a call center on its headquarters campus by hiring 200 customer service representatives and enlarge the operation further. It will include callbacks of some employees who worked in Sprint’s Overland Park call center that closed earlier this year.

Claure said call center employees at the headquarters would see the thousands of other employees on the campus and, as a result, do a better job than those far away from the company’s operations. He made the decision after listening to customer care calls when he first joined Sprint.

“It bothered me that we had offshored a lot of the customer care, and I’m going to start a new trend,” Claure said.

Claure, however, said consumers probably won’t be bothered should Sprint slip from being the third-largest national wireless carrier. His counterpart at No. 4 T-Mobile US Inc. has said T-Mobile would surpass Sprint by the end of this year. Claure said it probably would mean more to Sprint employees, who he said have humbled him by how hard they’re working.

In the earnings report Monday, which came after the stock market’s close, Sprint said it continued to shed the most valuable kind of customers, those who traditionally have signed contracts for phone service. It lost 336,000 of these customers in the recently ended quarter.

Total connections to its network increased by 484,000 thanks to gains mostly from its wholesale business, which generates less revenue for Sprint.

Sprint ended September with 55.04 million subscribers, compared with 54.55 million in the previous quarter and 54.88 in the same period a year earlier, its announcement said. The report covered July, August and September, which is the second quarter of Sprint’s fiscal year that began April 1.

Revenues in the quarter were $8.49 billion, compared with $8.79 billion in the previous quarter.

Sprint suffered a net loss of $765 million, or 19 cents a share, after posting a profit of $23 million a quarter ago.

Claure, a billionaire Miami businessman, moved to Kansas City to lead Sprint, which is 80 percent owned by Tokyo-based SoftBank Corp. He has begun a companywide cost review, dramatically changed marketing plans and made adding customers his priority.

“We have started a transformational journey,” Claure said in the announcement. “While the company continues to face headwinds, we have begun the first phase of our plan and are encouraged with the early results. Every day we are focused on improving our standing with consumers, improving our network and controlling our costs.”

During the call with analysts, Claure said the strategy work continues as well as his efforts to build a new management team. He told The Star that some additions to and subtractions from the current management team would be announced next week.

The team will draw from within Sprint’s ranks and from outside the company. Sprint recently added SoftBank executive Junichi Miyakawa to its payroll as technical chief operating officer overseeing its network and technology efforts. Claure said that Miyakawa was moving to the Kansas City area and that he would welcome additional SoftBank crossovers.

Analyst Craig Moffett with MoffettNathanson Research said in a report on the quarterly results that those trends and recent price cuts are just starting to hit Sprint’s finances, and that “the worst is yet to come even if subscriber trends get a little better.”

Sprint said its new pricing plans, which are simpler and offer better value to customers, helped attract customers in September and October. Executives said they expected to boost the number of those high-value customers, with plans including phone and tablet connections, during the fourth quarter of the year but were not ready to say they will be adding more high-value phone customers in the final three months of 2014.

Claure also said that the efforts won’t change Sprint’s fortunes quickly and would even hurt it financially in the short term before making the company more successful in the long run.

Roger Entner, an analyst with Recon Analytics LLC in Dedham, Mass., said before the earnings release: “Most wireless carriers are like supertankers: It takes a while to turn them around. With a new captain on board, there might be more urgency than before.”

To reach Mark Davis, call 816-234-4372 or send email to mdavis@kcstar.com. Follow him on Facebook and Twitter @mdkcstar.

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