Sprint eyes cost cuts, no new debt
NEW YORK (Reuters) - Sprint Nextel Corp plans to cut costs and use cash to pay back its $3 billion of debt due in 2009 and 2010, rather than raise new financing in tight capital markets, its finance chief said on Monday.
Chief Financial Officer Bob Brust plans to prepare a cost cutting plan for the board in January that may include layoffs, more outsourcing and a reduction in network expansion plans.
"The main focus for 2009 is cash, keeping the company completely liquid in this economy," Brust told Reuters. "We're going to carefully look at the cost structure .... Everything's on the table."
He said that Sprint, which has already been offering buyouts to employees, could cut jobs, eliminate expensive contractors, and outsource some information technology functions.
While the company will continue spending to maintain its network quality, it would likely hold back on any expansion until the economy starts to improve, Brust said.
"You can always postpone things until after the storm passes," said Brust.
But he said the company would not be looking to sell assets because it would be difficult to find a buyer in the current credit squeeze.
Brust took over as CFO in May after previous CFO Paul Saleh left in a management reshuffle a few months before. The No. 3 U.S. wireless service has been suffering from such losses because of weak network capacity and poor customer service since its 2005 purchase of Nextel Communications.
The company has $600 million of debt due to be paid in May 2009 and another $2.4 billion in 2010, but it plans to avoid requiring new capital in the next two years, Brust said.
As well as paying down debt, he said the company, which has about $4 billion in cash, also needs to reallocate some savings to boost advertising and other efforts aimed at stemming customer losses.
While Chief Executive Dan Hesse will make the ultimate decision on such efforts, Brust said he would advise that Sprint not use cellphone service price cuts as part of its efforts to help retain users or attract new ones.
Brust said Sprint's outlook was unchanged from November 7 even as the U.S. economic situation has deteriorated significantly.
"So far on the wireless side there's been no mass disruption I can see," he said. "So far we're where we were when we did the announcement in November .... We've seen pressure from the recession but nothing crazy."
Sprint on November 7 forecast downward pressure on average monthly revenue per user in the fourth quarter and continued pressure on postpaid subscriber numbers. However, it noted that gross customer additions would stabilize, with customer cancellations at a similar rate to that in the third quarter.
Brust declined to estimate when Sprint earnings before interest, tax depreciation and amortization would stabilize as that would depend on improving subscriber numbers as well as cost cuts, but he said he hoped it would be in 2009.
Brust, who had not worked in the telecommunications industry before Sprint, came out of retirement for the job in May, after leaving Eastman Kodak in 2007.
Since then he has been focused on reducing expenses with cutbacks touching everything from office supplies and bottled water to travel spending and campus maintenance services.
For example, he saved $17.6 million in the third quarter by cutting all but the most crucial office supply purchases.
"If you can certify that you need a new pencil I might give it to you," he joked.
Sprint shares rose 22 cents, or 8.46 percent, to $2.82 at mid-afternoon on the New York Stock Exchange, still down almost 70 percent from August levels.
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