Despite reporting its lowest-ever customer churn rate, Sprint has taken the axe to at least 2,500 jobs, mainly in customer service, across six customer care centers. The cuts also include positions at Sprint's Kansas headquarters, as part of a plan to slash $2.5 billion in costs.
Sprint could not immediately be reached for comment, but according to the Kansas City Star, “company officials” confirmed the cuts on Monday. The paper also cited an e-mail Sprint sent to its employees last week outlining the changes. In addition to the layoffs in the customer care department, the Star said Sprint is also firing five vice presidents. Reuters reported on Monday that company spokesperson Michele Boyd confirmed the cuts.
On the surface, these cuts doesn’t make much sense given the company’s strong earnings for the third fiscal quarter of 2015 that were announced earlier this week. The company posted growth in postpaid phone customers for the second consecutive quarter. In fact, Sprint saw the highest number of new customers in three years during that period -- 366,000 -- and a mere 1.62 percent churn rate. (Churn rate refers to the percentage of customers lost, for example to another carrier, during a given time period.)
“It’s clear from our quarterly results that we are making great progress on achieving our goals,” said Sprint CEO Marcelo Claure, in a statement. “Revenue has stabilized, costs are coming out faster than expected, postpaid phone net additions were the highest in three years, postpaid churn was the lowest-ever for a third quarter, and the network is performing at best-ever levels.”
So, Why All the Cuts to Customer Service?
All told, Sprint reported the highest postpaid net ports on record, meaning it attracted more of its competitors' customers than it lost to competitors. The company also saw net operating revenue of $8.1 billion.
That leads us to wonder: why all the cuts? Independent telecom analyst Jeff Kagan told us he doesn’t have any clear answers, but he’s convinced that the company isn’t making the move lightly.
“I have a feeling Sprint is using a scalpel not a chain saw in their cuts. They understand the importance of customer care,” Kagan told us. “I don’t believe Sprint would do anything to mess up their progress to date. This is an important item to stay on top of. Now we’ll just have to wait and watch.”
In its earnings report, Sprint didn’t mention the new cuts but did update shareholders on moves to exceed its cost reduction target for fiscal 2015. These customer service cuts are clearly part of that effort. Sprint has made several rounds of layoffs over the past two years, bringing the total now 6,000 including this round of 2,500, the Star reported.
“Our transformation is taking hold and the momentum is accelerating,” said Sprint CFO Tarek Robbiati, in a statement. “Most importantly, we expect these cost reductions to be achieved without compromising network quality or impacting the customer experience.”
Focus on Customer Service
Sprint said that “a better network experience” has resulted in dramatic year-over-year improvements in postpaid churn. But is the company leaving the customer service component out of the financial equation?
According to JD Power’s most recent survey, T-Mobile ranked highest in wireless customer care performance. Sprint ranked the lowest among the top four -- T-Mobile, AT&T, Verizon Wireless, Sprint -- in customer service. Still, Kagan said he's hopeful about Sprint’s future even amid major customer service cuts.
“Sprint has had a good year during its recovery. The company has strengthened its brand in the eyes of their customers and investors. No one can predict what they will look like a few years out, but if they continue on this path I think they will be stronger and better,” said Kagan. “They have a new strategy which is focused in improving service, speed and customer satisfaction.”
Posted: 2016-01-28 @ 11:00am PT
Maintaining customer service levels is likely a transition model in which contracts between Sprint and a number of BPOs have been put into place.
Very likely the customer service function has been off-shored, and as a carrier, Sprint should have the means of making such a migration on the basis of technology easily.
Ensuring integrity of the business processes will be a challenge, but not overwhelming if this is the path the company has chosen.