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Instant Analysis: Sprint to Cut 2,500 Jobs

By Evan Niu, CFA - Jan 26, 2016 at 9:30AM

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The telecom brings down the axe as part of its ongoing effort to reduce costs.

What happened?
No. 4 wireless carrier Sprint (S) is cutting approximately 2,500 jobs, a company spokesman told Reuters on Monday. The layoffs are primarily in customer service, but also include nearly 600 jobs at its corporate headquarters. Four call centers have been shut down in Virginia, Texas, Tennessee, and New Mexico, while the company also laid off employees at two other call centers.

Sprint started the year with about 33,000 total employees, so the workforce reductions comprise about 7.5% of its total headcount. Sprint said the move is part of its broader efforts to cut costs by $2.5 billion.

Does it matter?
Sprint has been on the ropes for years, and this move is the latest effort to help its turnaround. The company recently outlined another plan to overhaul its cellular network and generate $1 billion in cost savings as well. Cost-cutting would help Sprint pay for its substantial debt burden; interest expense was over twice that of operating income in the first half of the year.

The irony here is that Sprint has long had a terrible reputation for customer service, and its service levels will likely deteriorate amid the layoffs and cost cuts. Sprint is now trying to undercut its rivals in an attempt to win back customers, which will still squeeze profitability even if it can successfully poach customers from other carriers.

Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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