After Failed Attempt to Acquire T-Mobile, Sprint Tightens Its Belt

After Failed Attempt to Acquire T-Mobile, Sprint Tightens Its Belt

U.S. operator Sprint, which last week withdrew its offer for rival MNO T-Mobile amid concerns over regulatory approval, will turn its focus to cost-cutting in the months to come. Marcelo Claure, Sprint’s new CEO, who started on the job Tuesday, reportedly stated in an internal memo: “In the short term, our success will come from our focus on becoming extremely cost efficient and competing aggressively in the marketplace. The management team has been working closely with the board to outline the future strategy of the company.” That strategy will likely involve reducing labor costs by downsizing employees and economizing on network infrastructure costs.

Tarifica’s Take

Sprint’s ambition to acquire T-Mobile was driven by its desire to combine the two networks into one. That would have fixed a longstanding problem for Sprint—a network widely perceived as insufficient to meet customer demands. Adding the number-four carrier’s network would have put Sprint in a strong position to compete with the big two, Verizon Wireless and AT&T. Now that Japan’s SoftBank, which owns 80 percent of Sprint, has decided to abandon its bid for T-Mobile, Sprint is going to have to find other ways of improving its competitive stance—and that will be far from easy.

The operator has been losing customers steadily for the last seven years; one of Claure’s mandates in his new job is to reverse that trend. Retention will depend in large part on service quality, and the money to improve the network will have to come from somewhere—in this case, apparently, from job cuts. Such cuts would likely have been necessary in any case, considering the present state of Sprint’s revenues, but the need to invest in infrastructure will doubtless make those cuts deeper and more painful. And if T-Mobile ends up being acquired by another company—such as satellite TV provider Dish Network Corp., the current favorite suitor—Sprint’s road ahead could get even rougher.