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Archive for Thursday, June 17, 2004

Sprint blames long-distance battle for 1,100 job cuts

About 50 percent of layoffs to affect K.C. region

June 17, 2004

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— Citing increasing competitive pressure in the long-distance market, Sprint Corp. said Wednesday it would eliminate up to 1,100 jobs, or 1.6 percent of its work force.

Of the jobs being eliminated, 850 are in the unit that provides service to businesses, with up to 250 others in jobs supporting that operation, including some in information technology.

Sprint Business Solutions president Howard Janzen said the cuts would be systemwide, but about half will be in the Kansas City area. Those whose jobs are being cut will be notified by mid-July, Sprint said.

Overland Park-based Sprint employs about 70,000, including about 20,000 in the Kansas City area. It has cut employment by more than 22,000 during the past two years.

The announcement said Sprint also wanted to make organizational changes to improve efficiency.

"We have continued to look for ways to improve the business, cut overlaps, and move as close to the customer as possible," Janzen said.

Since the beginning of the year, Sprint has offered business customers a package that includes long distance, wireless and local services.

"There's been good acceptance from business customers, but when you look at those segments, the long-distance piece is undergoing very strong pricing pressure because of the competitive nature of the business," he said. "Part of this change is responding to that pressure."

AT&T said three months ago it would not lose long-distance business over price, and MCI responded with a similarly aggressive approach, said Jeffrey Kagan, an independent analyst from Atlanta who follows the telecommunications industry.

"If that's not the beginning of a price war, it's pretty darn close," he said.

Janzen said long-distance revenue from business customers was down by 4 percent in the first quarter, compared to a 9 percent drop for AT&T and 17 percent for MCI.

"We are certainly doing a better job than the competition, but it is still a decline and that is one of the things we are responding to, to be sure we can continue to drive costs down and remain competitive," he said.

Janzen said that with the regional Bell operating companies now having approval to provide long-distance service in every state, the field has become increasingly competitive.

"As a result we have seen significant declines in price," he said. "That pressure has been very strong over the last four to six months."

While Kagan believes telecom companies will continue for years to make money selling long-distance service, he said growth in the industry would be in broadband and wireless. Sprint, he said, is positioning itself to be a dominant player in both.

"The upside is that there are big growth opportunities for these companies," Kagan said. "It's just that it's not happening at the same time."

Shares of Sprint closed down 45 cents to $17.42 in trading Wednesday on the New York Stock Exchange.

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