Sprint CEO Plans Cost Cuts to ‘Compete Aggressively’ for Users

Aug 12, 2014 12:01 am ET

Aug. 12 (Bloomberg) -- Sprint Corp. Chief Executive Officer Marcelo Claure, in his first day on the job, told employees to expect further cost cuts and a more vigorous competitive edge.

“In the short term, our success will come from our focus on becoming extremely cost efficient and competing aggressively in the marketplace,” Claure said yesterday in a memo obtained by Bloomberg News. “The management team has been working closely with the board to outline the future strategy of the company.”

The plan is likely to include job cuts, along with reducing costs for network infrastructure and lowering expenses for customer service by encouraging subscribers to use the Internet more, said David Heger, an analyst at Edward Jones in St. Louis. Sprint had about 36,000 employees at the end of March.

“I’m not sure how they would be able to significantly cut costs without looking at labor costs and their overall headcount,” said Heger, who advises selling Sprint shares. “The business is labor-intensive.”

After backing off this month on a plan to merge Sprint with T-Mobile US Inc., Sprint Chairman Masayoshi Son brought in Claure, who founded phone distributor Brightstar Corp., to reinvigorate the ailing wireless carrier. The new CEO is charged with helping Sprint attract subscribers after his predecessor, Dan Hesse, lost monthly customers every year since 2007.

‘Makes Sense’

Claure said he’d hold a companywide meeting with employees on Aug. 14. While he didn’t mention T-Mobile by name, he alluded to the scrapped merger plan.

“You have probably seen the many media reports speculating about Sprint’s future,” he said. “As I have already said, consolidating makes sense in the long term but, for now, we will focus on growing and repositioning Sprint.”

Son’s SoftBank Corp., which owns about 80 percent of Sprint, is counting on Claure to help return the U.S. carrier to growth. In a discussion with reporters and investors last week in Tokyo, Son said he chose Claure because of his entrepreneurial spirit.

“Marcelo, a street fighter, has enlarged Brightstar from zero to a wholesale firm crossing more than 100 countries,” said Son, who acquired control of Brightstar last year. “When he came to the U.S., he had only $100 in his pocket and then he made a company with sales of 1 trillion yen. In that sense, he is the street fighter.”

‘Deep Insight’

Claure, 43, said last week at Sprint’s annual meeting that he will look at the company’s costs “extensively” and that its network must improve. He joined Sprint’s board in January of this year.

“During my time on the board, I was exposed to Sprint’s great history of success and innovation,” Claure said in the memo. “This time also provided me with deep insight into some of the challenges and opportunities we have ahead of us - and some of them are significant. The good news is we have already started working on them.”

In July, Overland Park, Kansas-based Sprint reported its first quarterly profit in more than six years, with sales that topped analysts’ estimates, after holding onto more subscribers than projected. Still, the company again lost monthly contract customers.

As he looks to get Sprint’s house in order, Claure spent “this past weekend looking at properties in Kansas City and enrolling my children in a local school,” he said in the memo. “We are ready to hit the ground running.”

--With assistance from Caitlin McCabe in New York.