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Headline: Sprint Nextel and Ericsson reach $5 billion network services agreement July 27th, 2009
On July 9th, Sprint and Ericsson announced a plan for Ericsson to take over Sprint’s fixed and mobile network operations. This deal represents the largest Managed Services contract in North America so far, both in terms of contract value and the scale of operations to be managed. This wireless and wireline network Managed Services agreement called "Network Advantage” will provide Ericsson with a payment for services in the range of USD$4.5 billion to USD$5.0 billion over the next seven years and with an option to renew at that end of the period. The details of the deal are: • • • The deal spans across all Sprint’s CDMA and iDEN Networks, excluding the Clearwire WiMAX network, international operations, and any future LTE plans Ericsson will take responsibility of the operations of iDEN, CDMA and Wireline networks including provisioning and maintenance for Sprint's CDMA, and iDEN networks Transference of around 6,000 Sprint employees to Ericsson’s Services Inc organization. No forced reductions are currently contemplated as a result of this agreement Sprint will retain the customer interface, customer experience, customer technical support, ownership of network assets, strategy, investments, technology and vendor selection. Customers will also continue to work directly with Sprint employees for technical support Implementation is under way and transfer of headcount and operations are expected to start by Q3 2009.
What does it mean for Sprint?
Improved perception of leadership: Sprint is the first operator in North America taking a step toward managed services as a competitive strategy. So far competitive moves have been driven by technology. This deal will put the company in a very strong position in terms of network efficiencies, cost reductions and service innovation. Sprint will enjoy a world-class network services model by leveraging Ericsson's leadership in network services, its proprietary tools, and the knowledge of more than 30,000 experienced and highly specialized service professionals, enabling agility and operational efficiencies in its networks. By centralizing operational services Sprint can achieve savings in various ways:
• • •
Cost reductions through economies of scale, along with some scale benefits where both companies can negotiate together Focused resources supporting three networks with common systems, tools and best practices. The creation of knowledge and experience through synergies between the two companies’ professionals.
By delegating the responsibility of operational tactical activities to Ericsson, Sprint will be able to focus on more strategic aspects of their business such as improving quality of service, network expansion and delivering innovative services to their customers to become more competitive, issues that have negatively impacted the company in previous years. Finally, by reducing operational costs and improving network efficiencies the company will be able to achieve an improved financial position.
What does it mean for Ericsson?
Until to now, the trend for professional services outsourcing has been stronger in Europe where operators have become increasingly more concerned with improvements to service innovation, to maintain or improve customer satisfaction and competitiveness. Ericsson has a strong focus on managed services and systems integration, and operators are also becoming more and more interested in network transformation and cost reductions. In 2008 Ericsson had some important wins including Vodafone UK and T-Mobile/Hutch UK. Managed Services represented around 34% of its Professional Service Business in Q109. This new deal further strengthens Ericsson’s global leadership in the Managed Services business. In its Q109 results report Ericsson communicated a growing...