NEW YORK -(Dow Jones)- Sprint Nextel will cut about 5,000 employees as part of a drive to trim costs and spur growth after the telecommunications company lost cellphone subscribers in the fourth quarter, news that sent its shares down 8% in late trading Monday.
Shares of Sprint recently traded at $17.98, down 8.4% from its close of $19.64.
This is the most drastic in a series of Sprint Nextel measures to overcome the integration pains from the August 2005 merger that created the company. Since then, Sprint Nextel has lost millions of subscribers to competitors, incurred hefty debt expenses and seen its share price decline.
The job cuts - most of which will come in the first quarter - and other cost-saving measures are expected to add $1 billion to the company's 2007 adjusted operating income before depreciation and amortization. The Reston, Va., company now expects adjusted OIBDA at $11 billion to $11.5 billion, compared with the 2006 target of $12.6 billion to $12.9 billion.
Sprint also plans to rid itself of about 1 million square feet in operating leases and shut down certain stores and kiosks in 2007, the company said on a conference call.
The cellphone provider said cost savings in 2007 will offset the damage to adjusted OIBDA from its move to raise the credit-quality bar for customers, investment plans and other drags on that statistic.
Stressing confidence in long-term prospects on the conference call, Sprint said the first quarter will be the last quarter of decline in monthly subscriber numbers. The company also sought to assuage investor concerns about debt leveraging.
"We are committed to maintaining a strong balance sheet and an investment-grade profile," said Chief Financial Officer Paul Saleh, on the conference call.
Also on the call, Chief Executive Gary Forsee said the company would hire someone in the new role of president and chief operating officer in the first quarter. Originally, the company said it wouldn't replace Chief Operating Officer Len Lauer, who was ousted in the summer.
Separately, Sprint targeted 2006 revenue of $41 billion, 2007 revenue of $41 billion to $42 billion and 2008 revenue - both slightly short of the average analyst estimate - and growth in the mid-single percentage digits. Sprint ended 2006 with a subscriber base of 53.1 million and 64,600 employees.
-By Rob Curran, Dow Jones Newswires; 201-938-5176; Robert.Curran@dowjones.com
(Ana Campoy contributed to this report.)
(END) Dow Jones Newswires "
Posted to the site on 9th January 2007
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