Report: Sprint signs $2bn outsourcing deal with Ericsson
Published: 17 March, 2009
READ MORE: Ericsson | Sprint Nextel
Sprint Nextel is reported to have taken the plunge and signed a $2bn network outsourcing agreement with Ericsson, in a move it has been considering for months. Although Ericsson has been named as the partner by sources since the start of the year, such a deal would still be a big blow for Motorola, which is the exclusive supplier of the iDEN network inherited with the Nextel acquisition, and which numbered Nextel as its largest customer for many years.
Although Sprint executives hinted recently that any outsourcing move would not be imminent, the carrier is under increasing pressure to accelerate its cost cutting moves and improve its dismal run of quarterly results. The report that the deal has actually been signed came from a reputable source, Swedish business weekly Affarsvarlden, and if the paper is correct, Ericsson will take over the management of all Sprint's networks.
This would be one of the Swedish giant's largest ever deals and a major boost to its strategy of increasing its business in outsourcing and hosted services, as its equipment market commoditizes and comes under price pressure from Huawei. Ericsson leads the market in carrier outsourcing, but many of its successes have come from emerging markets like India, or in its western European heartland - a big win in north America would support another of its key growth strategies, to increase its presence in that region, especially at the expense of the suffering native vendors, Nortel and Motorola.
The award would also highlight a more general trend in the wireless industry - to look for operational and services excellence from suppliers, rather than specific technologies. In many ways, Ericsson is a counter-intuitive choice since it has no experience in selling or running either CDMA or iDEN networks, and little knowledge of dealing with Sprint. But the Swedish firm has been arguing for some time that the individual technology is the least important factor in running a network effectively, and its other advantages, such as strong track record and financial stability, will have weighed heavily with Sprint, especially when set against the turmoil in most of Sprint's incumbent suppliers, even Alcatel-Lucent.
Sprint has been looking to cut costs radically as its customer base shrinks, cutting 8,000 jobs and closing or outsourcing some call centers. Earlier this year, the Kansas City Business Journal speculated that the Ericsson deal would involve the transfer, or 'rebadging', of up to 7,000 Sprint staff to Ericsson, saving about $500m.
Former Ericsson executive Sven-Christer Nilsson joined the Sprint board last November, prompting the first rumors of a 'rebadging' strategy. Nilsson was actually CEO of Ericsson for 15 months in 1998-1999, though Sprint is unlikely to dwell on that fact, since he resigned after failing to implement restructuring moves that were badly needed at that time, when Ericsson was in crisis.
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