KANSAS CITY, Mo. (AP) — Sprint Nextel Corp. is eliminating about 8,000 positions as it seeks to cut annual costs by $1.2 billion in the face of persistent subscriber losses.
The nation’s third-largest wireless phone carrier provider said Monday it will largely complete the layoffs, which comprise about 14 percent of its 56,000 employees, by March 31. The company said it expected a first-quarter charge of more than $300 million for severance and other costs.
The company said it is also suspending its 401(k) match for the year, extending a freeze on salary increases and suspending a tuition reimbursement program.
“Labor reductions are always the most difficult action to take, but many companies are finding it necessary in this environment,” Chief Executive Dan Hesse said in a news release. “Our commitment to quality will not change.”
Sprint shares rose 11 cents, or 4.5 percent, to $2.57 in midday trading Monday.
The Overland Park, Kan.-based company has struggled since acquiring Nextel Communications Inc. in 2005. Technical problems, poor efforts to consolidate the two companies and stiff competition for feature-rich phones have led many subscribers to switch to competing services.
As of Sept. 30, Sprint had 50.5 million subscribers, down 3.5 million from a year earlier.
Analyst Christopher King at Stifel Nicolaus said the layoffs represented Sprint’s attempt to match the number of employees to its lower number of subscribers.
“Given the current state of operations, this was probably the right thing for them to do,” King said.
He doesn’t see Sprint as a bankruptcy candidate, at least not for two years. “But certainly as you get into 2011, depending on how their operations shake out over the next couple of years, there could potentially be some concerns there,” he said.
Another analyst, John Hodulik at UBS, wrote in a research note Monday that it might be difficult for Sprint to turn the tide of subscriber losses, given that nearly everyone has a cell phone and few people switch between the major carriers.
The company’s layoff announcement comes a month after AT&T Inc. announced it was cutting its work force by 4 percent, or 12,000 jobs, to deal with the effects of the recession and the continued erosion of its traditional wireline business. However, AT&T’s wireless arm has been gaining subscribers, as have Verizon Wireless and T-Mobile USA.
Sprint spokesman James Fisher said the company is still deciding where the job cuts will come. But he said the company will likely avoid significant reductions in its customer service and network quality divisions, where Sprint has tried to improve in recent years.
Sprint also announced Monday it will release its fourth-quarter earnings on Feb. 19, more than a week earlier than originally scheduled.