Sprint transfers network operation to Swedish telecom Ericsson

KANSAS CITY, Mo., Jul 09, 2009 (McClatchy Newspapers - McClatchy-Tribune News Service via COMTEX) -- S | Quote | Chart | News | PowerRating -- Sprint Nextel is transferring the day-to-day operations and maintenance of its networks _ along with 6,000 Sprint employees and up to $5 billion _ to a Swedish telecom company.

The seven-year deal with Ericsson, the self-described world's leading supplier of telecommunications, is meant to cut costs for Sprint and free its executives to focus on other areas such as customer service and new products. Such a move with Ericsson or a similar company had been rumored for months.

Ericsson will assume the task of operating Sprint's wireline and wireless networks, including such jobs as maintaining wireless towers, upgrading software and making other improvements.

It is forming a subsidiary, Ericsson Services, which will be based at the Sprint campus in Overland Park, Kan. About 2,000 of the 6,000 transferred Sprint employees work in the Kansas City area, and they will essentially stay put.

Ericsson said it did not plan any layoffs, and company officials spent some of Thursday reassuring the affected employees that they had jobs with "almost consistent" pay and compensation.

"We need these employees," said Scot Willis, an Ericsson vice president.

Though the subsidiary will concentrate on the Sprint contract, Ericsson said it hoped to eventually attract additional network servicing business from other companies.

Sprint stressed that it was not selling its networks or ceding control, but it will mean some reshuffling. The 6,000 Sprint employees, just over 10 percent of the company's workforce, are to become Ericsson employees by the end of September.

Sprint said its customer service and technical support assistance would continue to be offered by Sprint employees.

Ericsson is to receive $4.5 million to $5 million over seven years of the agreement. Sprint said the arrangement would save it money on employee and other operations costs, although it declined to say how much. Sprint laid off 8,000 employees earlier this year, which it said provided $1.2 billion in savings.

Sprint has lost about 4 million customers in the past year but still has 49 million wireless subscribers, trailing Verizon Wireless and AT&T. But Sprint has said it is turning things around with better customer service and product offerings such as the new Palm Pre, along with improvements to its network.

Just this week, a PC World magazine said Sprint's top-tier "3G" network was more reliable than Verizon and AT&T in 13 cities tested. And the deal with Ericsson could provide further improvements.

Sprint is expected to invest some of its savings from the deal to improve its coverage. And Steve Elfman, president of Sprint's network operations, said Ericsson's servicing expertise would further upgrade Sprint's networks.

Some see the country's first major telecommunications company outsourcing its network operations to be something of a gamble, since a well-performing network is crucial to reliability. During a conference call with reporters and analysts Thursday, Elfman was asked whether Sprint was giving away the "keys to the castle" in its agreement with Ericsson.

But Elfman emphasized that Sprint would maintain control and still make all the strategic decisions about its networks. He also noted that Sprint would still have about 2,000 employees doing work related to the networks, such as budgeting.

The deal also doesn't include the company's WiMax technology, which provides high-speed wireless Internet access and was transferred to Clearwire Corp. last fall. Sprint is a majority owner of the company, which is rolling out WiMax services in several cities this year.

In the end, Ericsson will be crucial in the success of the deal to handle Sprint's networks which they are calling Network Advantage.

Founded in 1876, Ericsson provides communications networks, related services and handsets. It has built networks in more than 175 countries and is currently managing networks that serve 275 million subscribers worldwide.

Company officials spent some of Thursday reassuring the affected Sprint employees that they have jobs and with pay and compensation "almost consistent" with what they have now.

"We need these employees," said Scot Willis, an Ericsson vice president.

Ericsson, with all of its worldwide experience, has done some business in the U.S. but nothing of the magnitude of the Sprint deal.

"We're looking forward to a long good relationship," an Ericsson executive said Thursdsay.

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