Sprint Nextel reported deeper-than-expected subscriber losses on Friday and said it would cut about 4,000 jobs, sending its shares down 19 percent to their lowest level in more than five years. The No. 3 U.S. mobile phone service has been losing ground to bigger rivals such as AT&T Inc amid network and customer service problems that drove away high-value post-paid customers who pay monthly bills.
On Friday, the company reported net losses of 683,000 post-paid subscribers, far worse than analyst forecasts that ranged from a loss of 350,000 to 500,000 subscribers. "They"re trying to keep ahead of a business ... that seems to be springing new leaks faster than they can plug them," said Sanford C. Bernstein analyst Craig Moffett.
The subscriber losses likely represented a combination of U.S. economic weakness and Sprint"s own competitive problems within the industry, Moffett said. Sprint predicted further pressures on its ability to attract subscribers and turn a profit in 2008, saying it would cut nearly 7 percent of its work force and close about 8 percent of its stores to improve its performance.
The company plans to shutter 125 stores and eliminate more than 4,000 sales outlets within other retailers. Sprint has about 20,000 total distribution points, including some 1,400 of its own retail stores. Sprint expects the measures to trim labor costs by an annual rate of $700 million to $800 million by the end of 2008. It will record a first-quarter charge for severance costs.