Why Is Sprint Cutting Jobs?

In this series, we’ll look at some updates for Sprint (S), spanning recent developments and network performance of the company in select metro markets in the second half of 2015. We’ll also look at Sprint’s value proposition in the US telecom space.

Let’s start with Sprint’s recent workforce rationalization initiative. According to the telecom company’s filing, “On December 16, 2015, Sprint Corporation (the “Company”) began implementation of a workforce reduction plan to reduce costs. The plan is expected to include steps to, among other things, improve operational efficiencies and reduce costs.”

The filing also stated that “This planned reduction is expected to be largely completed by January 31, 2016 and will include certain management and non-management positions.” The filing mentioned that the telecom company anticipates recording around ~$0.15 billion related to “severance and related costs” in fiscal 3Q15, or calendar 4Q15.

According to Sprint, it has planned to rationalize annual costs by at least $2 billion from fiscal 2016. Also, it stated that this figure would come from operating expenses of the telecom company. According to the company, it will have to take up some transformation program costs to achieve this cost-cutting goal. These transformation program costs are expected to be in the range of ~$1 billion to ~$1.2 billion from fiscal 3Q15 until the end of fiscal 2016.

For diversified exposure to US telecom companies, you may consider investing in the iShares Core S&P 500 ETF (IVV). The ETF held a total of ~2.4% in telecom players AT&T (T), Verizon (VZ), and CenturyLink (CTL) at the end of October 2015.