Sprint Cutbacks Reach Channel May 2007

Under mounting pressure from Wall Street, Sprint Nextel Corp. is making changes at the corporate level cutting management layers and de-emphasizing legacy services that are trickling down to the indirect channel program, including trimming the rolls of its Business Solutions Partner Program back to only 50 master agents.

Sprint has suffered quarterly losses ever since merging with Nextel in 2005. Hundreds of thousands of wireless users, reportedly fed up with much-criticized customer service and degraded signal quality, have defected, pushing investors to press for reforms. Executives complied. They lowered wireless plan prices, spent millions upgrading networks and funded training to improve subscriber support (whose reputation recently landed Sprint Nextel in MSN Moneys Customer Service Hall of Shame).

Those strategies werent enough. So, this spring, Sprint Nextel compressed its executive-level management by approximately 20 percent. It laid off or reassigned directors and demoted vice presidents who would otherwise lose their jobs to directors. Those cuts have seeped into the carriers indirect channel hierarchy. Steve Rowley, formerly a vice president, has become a director. Rowleys title swap was not official until mid-April. Rowley did not return requests for an interview. Rowley effectively fills a post left by John Muscarella, who was made a director in the carriers WiMAX division. One agent echoes several others when he says, Were happy that that layer was removed because its a little easier to get things done.

Another change comes in the form of this directive to agents: no more sales of toll-free, FONCARD, conferencing, ISDN, AIATF or Sprint Complete Access services. Customer renewals should be evaluated to determine if they fit well in our new wireline strategy: 80-90 percent of product portfolio should be comprised of wireless and IP services (guideline), the company said in a memo to agents. The information was sent to PHONE+ by a source who asked to remain anonymous.

Current wireline customers will not be cut off, says Mark Krantz, Sprints vice president of distribution channels, clarifying the memo. The problem with these standalone wireline products including voice, frame relay and private line is they are no longer profitable, Krantz says. Sprint Nextel will keep selling wireline products as long as they are part of a bundle, he adds. On the whole, though, says Sprint Nextel spokeswoman Melinda Tiemeyer, we are really not encouraging standalone sales for these products.

The policy makes official what has been going on in practice. Whats ironic is their pricing was so high anyway that we werent selling much voice for them, explains one agent. Others PHONE+ spoke to agreed.

In addition to moving away from TDM, one master agent says Sprint also has stopped selling private line services, with the exception of international and selected private lines needed for MPLS. Sprint Nextel representatives confirm this strategy. The carrier expects to boost sales of wireless and data services, push more MPLS to wireline customers, and continue the progress in returning our national retailers and indirect channels to growth, Tiemeyer says.

A memorandum provided to channel partners and obtained by PHONE+ indicates the reason for the pullback on TDM is that the Sprint network is nearing capacity. Today, all of Sprints switches are at 90 percent-plus utilization with no plan for adding voice capacity to our current network, the memo states. Nortel no longer sells or supports the DMS250 switches and the only way to increase capacity is by reducing the current usage on our network. Sprint has no plans to invest more capital in our existing voice technology. Sprints voice plans for the future include VoIP.

Krantz insists the problem is not a lack of capacity, but a lack of profitability. Combined, the changes in management and product strategy are designed to make operations efficient across the board, he says.

To increase efficiency in the indirect channel specifically, Sprint Nextel has cut membership in the Business Solutions Partner Program to just 50 master agents.

The masters remaining in the Business Solutions Partner Program are the ones who have a track record of actually delivering value-added applications and solutions, says Krantz. Now, Sprint Nextel is freed up to focus on those high-value dealers. Were going to embrace them and go deep with them, and we cant afford to do that with all 500, Krantz says.

The rest now are supported by the carriers consumer organization. A long-time Sprint Nextel master agent, who has watched the reorganization firsthand, says the move does not bode well for these agents longterm. The consumer group is not really wanting these guys, nor do they know how to manage them, the agent says.

But Sprint Nextel executives see matters differently. There have been investment and cost-reduction actions taken in 2007, and Sprint continues to keep its focus on key priorities, one of which is improving our distribution channels, spokeswoman Tiemeyer says. We have not reduced our overall support of the channel from a service and support standpoint.

The eventual goal is to add WiMAX to the agent portfolio, and Krantz says he is pleased the channel will be able to tap into a strong player in former channel executive Muscarella when the product line is ready for deployment.

Krantz also says Sprint Nextel has plenty of partners, although that does not mean it wont consider potential new agents that offer unique capability. The company will be strict in its screening, however, he adds.

At least one master agent lauds the cutbacks and changes at Sprint, saying he would rather see a supplier adhere to a budget than ignore signs of trouble that could escalate over time.

While partners reviews of the carriers strategies are mixed, so are investors the companys stock continues to fluctuate although lately Sprints numbers are hovering closer to their 52-week high than to their low.