Sprint cutting 2K jobs after losing more subscribers

Scott Moritz
Bloomberg News

Sprint Corp. plans to cut about 2,000 jobs after the wireless carrier lost subscribers for an 11th straight quarter.

Sprint is eliminating about 6.5 percent of its 31,000 employees, a month after announcing an earlier round of job cuts. The combined firings may save $400 million a year and are part of a broader plan to reduce annual expenses by $1.5 billion, Sprint said Monday in a statement.

Monthly subscribers, including tablets, fell by 272,000 during the quarter that ended Sept. 30, worse than the 203,000 expected by analysts, half a million phone customers canceled service. The efforts to lure subscribers with price reductions have taken a toll on industry profits, and Sprint lowered its forecast for earnings for this year, citing the ongoing loss of customers.

“I was aware of the challenges facing the business, but not to the level of detail that I saw when I became the CEO,” Marcelo Claure, who was named chief executive officer after less than two years on Sprint’s board, said in a phone interview. “When I came in August, Sprint was in the worst place it had been in many years, so that forced me to take probably quicker action than I would have like to.”

Price battles

The defections highlight the challenge facing the third- largest U.S. wireless carrier, at a time when Verizon Communications Inc., AT&T Inc. and T-Mobile US Inc. are all gaining customers. Claure was named CEO halfway through the fiscal second quarter after parent company SoftBank Corp.’s failed attempt to merge Sprint with T-Mobile. Claure has since set out to dramatically reduce expenses and offer competitive plan prices.

Sprint shares fell as much as 8.9 percent in late trading, and were down 7.9 percent to $5.71 at 7:59 p.m. New York time. The stock had fallen 42 percent this year through the close yesterday.

“One must concede that they have a lot of heavy lifting to do,” Craig Moffett, an analyst at MoffettNathanson LLC, wrote in a research note yesterday. “They are doing all this at a time when T-Mobile has already reset industry pricing levels lower.”

In the past week, Verizon and AT&T have also introduced lower-priced data plans.

Wider loss

Sprint reported a wider net loss of $765 million in the fiscal second quarter, compared with $699 million a year ago. The Overland Park, Kansas-based company said it now forecasts adjusted earnings before interest, taxes, depreciation and amortization of $5.8 billion to $5.9 billion in calendar year 2014, down from a prior projection of as much as $6.9 billion.

Sprint lost 500,000 monthly phone customers in the quarter, bringing the losses so far this year to 1.8 million. The most recent quarter’s phone customer defections were partially offset by 261,000 tablet additions.

Claure said on a conference call yesterday that Sprint stopped losing customers after Apple Inc.’s new iPhone 6 and iPhone 6 Plus were introduced in September. He started an aggressive “iPhone for Life” promotion that lets customers get a new version of the device every two years. It costs $70 a month and includes unlimited data. Claure said Sprint will try to end this quarter “on a positive note” in terms of subscribers.

That’s a step in the right direction, said Walt Piecyk, an analyst with BTIG LLC.

“Investors understand that for the company to generate profits, they are going to have to get revenue growth,” Piecyk said. “It’s not going to happen just by making cuts.”

Meanwhile, Sprint said it’s reviewing management and plans to add executives through a combination of internal candidates, new outside hires and resources from SoftBank.

Revenue, Ebitda

In his first weeks on the job, Claure introduced a shared data plan with 20 gigabytes for $100 a month, twice the data offered by T-Mobile for the same price.

Revenue rose 9.5 percent to $8.49 billion in the quarter, while analysts estimated $8.66 billion on average.

The company also missed estimates for adjusted Ebitda, reporting $1.39 billion versus estimates for $1.66 billion.

Sprint’s wireless margin was almost 19 percent, down from 24 percent in the fiscal first quarter and missing the 24 percent estimated by analysts.

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