Sprint to cut up to $2.5 billion in costs, layoff workers in next six months

Edward C. Baig and Eli Blumenthal, USA TODAY | USA TODAY

NEW YORK-- Sprint recently tumbled behind T-Mobile into fourth place among U.S. wireless carriers. And now Sprint CEO Marcelo Claure has the company on the verge of drastic cost cuts.

Sprint told USA TODAY that it plans to significantly reduce spending, but it didn’t specify dollar amounts or how many of the company's 31,000 employees might be at risk.

The Wall Street Journal reports that Sprint could slash as much as $2.5 billion over the next six months and that layoffs are likely. In an internal memo cited by the Journal, Sprint Chief Financial Officer Tarek Robbiati wrote that cuts “inevitably will result in job reductions," and that employees must watch every expenditure.

“The main thing to consider when requesting to spend money is to take an owner’s mindset by treating every dollar as if it were your own,” Robbiati wrote in the memo.

In a statement provided to USA TODAY, Sprint confirmed that it was "likely that some jobs will be impacted," adding that it was "premature to discuss the details as we are in the early stages of the process."

"This is a difficult process and we won’t make decisions lightly. Whatever decisions are made, we will inform our employees first and treat any impacted employees with dignity and respect," said Sprint spokesman Dave Tovar in that emailed statement. “We believe the steps we are taking across our business are critical to ensuring Sprint is a viable, successful and sustainable business for the foreseeable future.”

Roger Entner, a telecom analyst with Recon Analytics says that Sprint needs to do more than slash costs.

"The answer to Sprint's woes is not cost cutting," he says. "What Sprint needs is true market differentiation."

Sprint CEO Claure has been trying a number of measures to boost Sprint's standing. In April he announced an initiative in which Sprint technicians would make house calls to try and help people purchase and set up their phones.

More recently, Sprint announced aggressive iPhone pricing plans for as little as $1.

The company also said it wouldn't participate in the wireless spectrum auction slated to take place next year. Even sitting the auction out, Entner says that Sprint has more spectrum than its rivals, an area he says Sprint should focus on.

Wall Street seemed to support the move to rein in costs. Sprint's stock closed at $4.25 Friday, up 4.94%.

During the three-month period that ended on June 30, 2015, Sprint's net postpaid subscriber additions were 310,000 compared to net subscriber losses of 181,000 in the same period in 2014. Sprint is expected to report earnings for its second fiscal quarter in early November.

The challenges for Sprint however remain in how it will compete, particularly with rival T-Mobile. T-Mobile, which has used aggressive advertising and promotions to improve its position in the U.S. wireless market, passed Sprint in August to become number three among U,S, wireless carriers.

“T-Mobile has shaken up the industry, their marketing has been extremely effective,” says Avi Greengart, a research director at Current Analysis who specializes in consumer platforms and devices. “Sprint has been able to be competitive on pricing, but not on network and its marketing efforts have not been as effective as T-Mobile’s. So you end up in a situation where you need to cut costs. The challenge then is if you’re cutting costs, will that impact your ability to improve the network?”

It's been a rough time for T-Mobile as well. CEO John Legere announced a data breach through partner Experian that could impact the personal data of around 15 million customers or potential customers. The records accessed by the hacker include information such as names, addresses and birth date as well as encrypted fields with Social Security numbers, driver’s licenses or passports, Legere said in a statement.

Those affected were applicants for T-Mobile services or device financing from Sept. 1, 2013 through Sept. 16, 2015, the company said on its website.

Email: ebaig@usatoday.com; Follow USA TODAY personal tech columnist @edbaig and reporter Eli Blumenthal @eliblumenthal.