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Sprint Nextel To Pare Distribution

1/18/2008 10:07:00 AM Eastern

Reston, Va. — Sprint Nextel will pare expenses in the coming months by cutting more than 4,000 jobs, closing 125 of its 1,400 company-owned stores, and pulling its products out of more than 4,000 of 18,600 third-party retail outlets, the company announced.

The cuts amount to a 9 percent reduction in company-owned stores and a 22 percent reduction in third-party retail outlets.

Sprint said it is taking the steps because it anticipates “continued downward pressure on subscriber trends, revenues, and profitability.” The company revealed that its subscriber base fell by 109,000 in 2007’s fourth quarter to 53.8 million and that its involuntary churn rate went up during that time.

A spokesman declined to say whether the third-party retail outlets that would be cut would come mainly from the ranks of independent wireless specialty stores and chains or from consumer electronics outlets, or both. Dropping the outlets will reduce expenses for supporting the outlets with a variety of support materials, he said.

Through the changes, Sprint said it expects to reduce its internal and external labor costs at an annualized rate of $700 million to $800 million by the end of 2008. The employee-headcount reductions are expected to be completed in the first half of the year and will include management and non-management positions, Sprint added.

The company will offer a voluntary separation plan, and former employees will receive separation pay and outplacement and other services. The company expects to record a first-quarter charge for severance costs associated with the workforce reduction.

At the end of 2007, Sprint Nextel served a total subscriber base of 53.8 million subscribers including 40.8 million post-paid, 4.1 million traditional prepaid, 500,000 Boost Unlimited, 7.7 million wholesale and 850,000 subscribers through affiliates.

For the fourth quarter Sprint Nextel reported a net gain of 500,000 subscribers through wholesale channels, growth of 256,000 Boost Unlimited users and net additions of 20,000 subscribers within affiliate channels. These gains were offset by net losses of 683,000 post-paid subscribers and 202,000 traditional prepaid users.

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