Sprint Renewing Parts Of Contract With Ericsson To Cut Costs

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Sprint and Ericsson have been partners in the telecom industry for seven years now, and their contract is scheduled to expire on September. However, in a recent press release, Ericsson has said that parts of the agreement are being renewed by Sprint. The contract was formed in July 2009 between Sprint and Ericsson and is worth $5 billion. It allowed Sprint to outsource its daily network operations of CDMA, iDen, and wireless networks to Ericsson. The fourth major US carrier, now owned by SoftBank, also transferred 6000 of its employees as a part of the contract to work under Ericsson. The whole process was codenamed 'Network Advantage' and gained a lot of attention, to the extent of being dubbed as the game-changer. Ericsson was also a core part of Sprint's Network Vision Programme, which allowed Ericsson to deploy and manage new network equipment for Sprint.

Sprint has decided to renew a part of the contract, allowing the Swedish telecom equipment manufacturer to retain some of the multi-vendor and development services. However, no details of the renewed contract have yet been disclosed. The renewal implies that Sprint will continue its partnership with Ericsson. However, the 4th largest telecom carrier in the US is ready to manage Network Service assurance and other services which were previously managed by Ericsson. As a part of the new deal inked by the two companies, a part of Ericsson's employees will shift base to Sprint, while the others are staying back. No information about the cost incurred by Sprint as a result of the new contract has been revealed either.

The new contract is in line with Sprint's target of cutting costs in every area possible while improving their network and services. According to Sprint's CTO John Saw, Sprint is confident about its network services owing to its large holding of the spectrum and a broad range of network services which will help the carrier improve its foothold in the competitive telecom market. Sprint shocked a lot of people when they announced its CapEx at $3 billion; about $1.5 billion less than what analysts predicted. They also garnered a lot of attention with this quarter's report, announcing that they had spent less than $500 million on networks.

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Sprint has managed to impress Wall Street with this quarter's report, announcing the most number of customers added in post-paid plans since nine years. However, things don't look as well for Ericsson, with CEO Hans Vestberg leaving the company after eight years at its helm. Despite the attempts to cut costs and recover lost margin, they are continually experiencing a slide in the operating income. Ericsson also reported a drop of $48 million in their net quarterly profit, down to $186 million.