Oct, 2001 : Sprint to Scrap High-Speed Network, Cut 6,000 Jobs

📅 October 18, 2001 - Sprint Corp. (sprint.com), the third-largest U.S. long-distance telephone company, said Wednesday that it would scrap an expensive high-speed network project and cut 6,000 jobs, or 7 percent of its workforce.

In a bid to cut costs and eliminate a drain on profits, Sprint decided toterminate its high-speed network initiative. The service, named ION(Integrated On-demand Network) would allow customers to make phone calls,send and receive faxes, and surf the Internet over a single phone line.
Sprint said it would cut the service, and help existing ION customers tofind alternative service arrangements. Sprint also said it could cut costsby ceasing the expansion of its fixed-wireless service, and by consolidatingmarketing functions and network operations in its core global markets group.This requires Sprint to slash 6,000 jobs, eliminate 1,500 contractorpositions, and take a $2 billion charge in the fourth-quarter to cover theclosure of ION and job cuts.
The total cash exit costs of terminating ION and severance packages areexpected to be about $600 million, including an estimated $200 million forseverance. However, the company said the termination of ION will result inannual savings of $1 billion.
Current users of Sprint's fixed-wireless offerings will continue to receiveservice, the company said.
The rest of the company's third quarter report showed consolidated revenuesof $6.72 billion, an increase of 11 percent from $6.04 billion a year ago.During the quarter, the PCS Group reported high year-over-year customergrowth, solid average customer revenue and improved cost metrics.
"In the quarter, we continued to see exceptional growth in our wirelessbusiness and a continued evolution in our wireline business as it adapts tochallenging market conditions," said William T. Esrey, Sprint chairman andCEO, in a statement. "With the announcements that we are terminating our IONefforts and restructuring several facets of our FON Group operations, we aretaking significant steps toward reducing our cost structure, gainingefficiencies and aligning our investments to the areas with the bestpotential for growth and return on investment."
The PCS Group's total customer base, including resale and affiliatecustomers, increased to 14.4 million, up 57 percent from third quarter 2000.The company operates the nation's largest 100-percent digital, 100-percentPCS wireless network, which now covers a population of nearly 244 millionpeople or more than 85 percent of the U.S. population.