The new year started off on an ominous note for Sprint Nextel employees: 4.000 of which will add the moniker former to their job titles. The changes underscore the wireless carrierï¿¼s ongoing struggle to compete in the cutthroat cellular market.Cracks in Sprintï¿¼s operations have been evident since last fall when the company dumped Gary Foresee, who had served as chairman of the board, CEO, and president. While he had tried to position the company as the gold standard for small and medium business users, Sprint was having trouble growing its customer base. In fact, the company lost about 125,000 customers in the fourth quarter of 2007. Quite simply, the carrier has not been able to match the marketing power of AT&T and Verizon, who have been vying for the top spot in the wireless market.
Facing a shrinking customer base, Sprint decided to cut 4,000 internal positions, reduce its outsourced services and contractor expenditures, eliminate more than 4,000 third-party distribution points, and close approximately 125, or 8 percent, of its company-owned retail locations. Putting these items into effect should reduce Sprintï¿¼s operating expenses by $700 million to $800 million by the end of 2008 and increase the likelihood of profitability. At least, that is what the new management team hopes.
The reality is such hope may be fleeting because Sprint stands at an important crossroad. While the wireless market continues to grow, the rates have slowed a bit recently, and competition has intensified. To differentiate its services, Sprint has traditionally concentrated on the business segment. Indeed, many small and medium businesses rely on Sprintï¿¼s services, and its Nextel services have been particularly popular. Unfortunately, that focus has not been helping the companyï¿¼s business as much as it desires. Cutting expenses only works if one counters that move with ways to increase revenue, so what will the company do next? At the moment, there is no clear sign of how Sprint plans to accomplish that task, and no easy route to reign in more customers.
In addition, cost reduction programs tend to have a negative impact on productivity. The shake up means that employeesï¿¼ attention will center more on their ability to keep their jobs than on helping customers. And cutting back on its outsourcing and contracting help could negatively impact Sprintï¿¼s service to its business customers ï¿¼ and its customer service is in need of improvement. In sum, these are trying times for Sprint, which faces a tenuous future, and in turn, they are times when their customers are filled with doubt. In cutting expenses, Sprint has taken a step necessary to please Wall St. Whether or not the company can follow that up with ways to please its small and medium business customers will determine its long term future.
Has your company used Sprintï¿¼s services? Are you second guessing your decision to use the companyï¿¼s services? What has been the impact of other vendorsï¿¼ reorganizations on your operations?