After months of rumors, Sprint Nextel has finally inked an outsourcing deal with Ericsson to hand over management of its nationwide wireless and wireline networks.
The seven-year deal, valued between $4.5 billion and $5 billion, will transfer 6,000 employees to Ericsson subsidiary Ericsson Services in Overland Park, Kan., which is also home to Sprint's headquarters. No other workforce reductions are currently part of the deal.
"Our intent is to put as much money as we can into expanding coverage and expanding quality of the network," said Scott Willis, vice president and general manager of Ericsson's Sprint account, during a conference call. "[The deal] will reduce our current spending levels and allow us to invest back into the network, which we think is essential."
Under the terms of the agreement, Ericsson will handle day-to-day operations and maintenance of Sprint's CDMA, iDEN and wireline networks and manage the carriers' inventory. Sprint retains full control of customer technical support and services and Sprint employees will remain their primary contact.
Sprint declined to provide details as to the deal's cost-saving benefits but it is estimated that the agreement could cut network costs by about 20 percent.
Although Sprint's release of the Palm Pre was seen as a strategic coup for the company, the carrier has struggled with ongoing losses, shrinking subscriber base and flat ARPU. The company has lost more than 6 million customers in the past six quarters and is expected to lose 3 cents per share this quarter on sales of $8.06 billion, an 8.6 percent slide over last year's figures.