Sprint Nextel Corp. (NYSE: S) has taken the next step to delete more costs from its bottom line by sending the management of its nationwide wireless network to Sweden's Ericsson. The deal -- valued at up to $5 billion -- will allow Sprint to offset its declining subscriber revenue and numbers with lowered costs.As part of the deal, about 6,000 Sprint employees will transfer to Ericsson, which will open up shop in Overland Park, Kansas right next to Sprint's U.S. headquarters. This is a good decision by Sprint, as it won't have to pay for those employees any longer and will get rid of the overhead associated with running a national wireless infrastructure. Ericsson is the largest supplier of wireless infrastructure in the world, so it easily has the resources to handle this rather large task.
Sprint will still own its network and responsibility for strategic planning, but the day-to-day operations will go away. While Sprint will get rid of labor costs, Ericsson will jettison costs on software licenses and similar items, making the play a win-win for both companies.
Perhaps this will free up Sprint to find a way ti increase its wireless subscriber numbers that it keeps hemorrhaging to larger competitors AT&T, Inc. (NYSE: T) and Verizon Communications, Inc. (NYSE: VZ). The Boost Mobile prepaid wireless brand has been the shining star thus far in Sprint's quarterly reports, but the company continues to bleed customers quarter after quarter.
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