Sprint aims to complete an unspecified number of layoffs by Jan. 30 as part of a $2 billion cost-cutting plan to return the No. 4 U.S. wireless carrier to profitability.
Sprint CEO to Cut Jobs by January 30, Vows Return to Profitability
As for layoffs, Claure tells Re/code his goal is to have them done before Jan. 30, when a new, less generous severance plan kicks in.
Asa Mathat for Re/code
“We have a very clear plan to return Sprint to profitability,” Claure said in a telephone interview Tuesday, following the company’s quarterly earnings report. “That’s the next big task; that hasn’t happened in 11 years.”
He also urged employees to take on an “owner’s mentality” when it comes to costs. That means workers will now take out their own trash and execs will use Uber rather than have a private town car on call.
Sprint has been trying to turn itself around at the same time that T-Mobile has been on an aggressive tear. Broadly, T-Mobile has been more successful at grabbing new customers, allowing it to leapfrog Sprint to become the No. 3 carrier.
The two companies have been jabbing at each other with escalating changes that the other then matches. Sprint shaved monthly consumer costs by introducing a leasing option; now T-Mobile also offers leasing. T-Mobile, on the other hand, was the first to offer discounted global roaming; Sprint soon followed suit. These cost cuts are the latest, and most extreme, challenge.
The cuts will be in place by next year. While some of that can be done by shifting lease costs and reducing the amount of time customers are roaming onto Verizon’s networks, Sprint has also said layoffs will be necessary.
Claure wants to make the cuts by the end of January to give existing employees a more generous severance check. Next year, Sprint plans to halve severance payments.
“I think we had a very generous severance compared to other companies,” Claure said. “We are bringing it to a more realistic level.”
To maintain morale, Claure said his approach is to be very direct with his employees. “Nobody likes to be in a company that is doing layoffs,” Claure said. “The way you beat that is being very honest and transparent.”
Other expense reductions will come from rethinking how each aspect of business is being done. “Sprint has had an eye on taking superficial costs every year,” Claure said, saying past cost-cutting at the company shaved 10 percent of expenses without really transforming the company’s operations. “This time is different.”
Asked for an example of more transformative changes, Claure pointed to new 15-second television ads that he says are half as long but just as effective.
The other piece of the puzzle, Claure said, is continuing to grow its subscriber base “without actually destroying the price we collect from customers.”
While the first moves Claure made were designed to grab headlines and attention, such as a $50 unlimited plan for new iPhone customers, Sprint’s latest changes have been focused on profitable growth. Claure noted that over just a few months, Sprint has gone from charging $50 for unlimited data to $70 per month, without seeing a backlash from customers.
Another effort has been to shift some loyal prepaid customers from Boost Mobile and Virgin Mobile over to the Sprint postpaid brand. Some 200,000 of the 237,000 postpaid customers that Sprint added last quarter came from such transitions. Claure said the move helps Sprint because the customers tend to spend more each month, and also benefits the customers as they have the ability to finance an expensive phone like the latest iPhone or Samsung Galaxy.
“They hate that they can only get low-end handsets,” Claure said of many prepaid customers. At the same time, he said, most don’t have the financial resources to pay $700 up front. Plus, moving to postpaid allows them to establish credit.
Claure said there is a whole team eyeing the company’s prepaid business for more opportunities to shift customers.
“Obviously, we are watching very closely,” he said.
This article originally appeared on Recode.net.
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