Sprint Plans Layoffs to Cut Operating Expenses

Sprint is planning to cut significant slack from its workforce and operations in the upcoming month.

Last year, due to customer losses, Sprint’s revenue decreased. Sprint’s customers were switching to the other three national wireless carriers, which put the company in a position of focusing on reducing costs across the board as an effort to manage overall profitability. Earlier this year, Sprint set up a target of cutting $1.5 billion in overall costs in 2015.

At the beginning of October, Sprint’s new CFO, Tarek Robbiati, who joined about a month earlier to help turn around the unprofitable carrier, said that he will cut about 10 percent of operating costs in an effort to save about $2 billion. In addition, he also identified another $500 million of reductions in equipment spending.

Now, Sprint is starting to slash costs with planned layoffs, as well as other cuts calculated to reduce control costs. According to the Wall Street Journal, Sprint CEO Marcelo Claure recently sent an email to company employees stating that the company would no longer be providing free water bottles and yogurt to staff at the company's Overland Park, KS, headquarters.

As of March, Sprint reported that it had 31,000 employees. Although the company has not disclosed the number of employees that will be laid off, the move will happen at the end of January 2016. It is expected that during today’s report on fiscal second quarter results, Sprint will deliver more details. Robbiati said "It's going to be hard, but we have to rip the Band-Aid pretty fast."

In the big picture, the $2.5 billion in reductions amounts to just less than 10 percent of the company’s current $26 billion annual operating costs. It is likely that Sprint will continue to tear into the operating expenses to reduce them as much as possible. Sprint's spokesman, Dave Tovar commented that "We are leaving no stone unturned and looking at all areas. We are trying to get more in line with the industry average."

A few months ago in September, Claure said that Sprint was working with SoftBank, which is the company’s majority shareholder, to set up leasing companies and other companies in order to finance the leasing of handsets and network gear. SoftBank said that it has no intention of selling its stake in Sprint.