Sprint Looks to Gain Savings by Outsourcing Operations to Ericsson

| Jul 10, 2009 | Wireless Services - U.S., Enterprise Mobility U.S., Business Network Services - U.S.

| Competitive Intelligence Report
| Analysts: Bill Ho, Kitty Weldon, Cindy Whelan

Current Perspective: Slightly Positive
Vendor Importance: Very High
Market Impact: Low

Event Summary

July 9, 2009 - Sprint announced Network Advantage, a nationwide managed services agreement for Ericsson to operate functions of Sprint-owned networks. The agreement valued from $4.5 to $5 billion over a seven-year period will have Ericsson assuming responsibility for the day-to-day execution of services, provisioning and maintenance for the Sprint-owned CDMA, iDEN and wireline networks. Some 6,000 Sprint employees are expected to transition to become Ericsson employees beginning sometime in Q3 2009.

Analytical Summary

• Current Perspective: Slightly positive on Sprint's outsourcing its network operations to Ericsson, because Sprint is looking to operate more cost-effectively while simultaneously looking to improve coverage and network performance. Optimally the arrangement with Ericsson will help with both of these initiatives, which are both key to Sprint's survival. The deal will also allow Sprint to save on OpEx and CapEx without having to lay off 6,000 network operations employees. Though Ericsson does have many years of global experience running managed services for telecom operators, Sprint represents its largest and most ambitious effort to date.

• Vendor Importance: Very high to Sprint, because this outsourcing deal represents an important milestone for the corporation as it struggles to right itself. Although it seems strange for a network-based operator to have a non-employee operational staff running its network, Sprint's current state, where it is struggling to cut costs to maintain financial viability, coupled with competitive pressures where it has to offer a superior user experience, required drastic ideas and actions.

• Market Impact: Low on the wireless services and enterprise mobility segments, because from a services and customer facing perspective, nothing changes. While no other competitors seem to endure the same pressures that Sprint is dealing with on a daily basis (i.e., continued customer defections quarter after quarter) all carriers must ensure consumers and business customers that their network is reliable, and can cope with the ever-higher bandwidth requirements of new multimedia and interactive services.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Wireless Services - U.S. | More information
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Recommended Competitor Actions

• All rival carriers should try and inspire uncertainty and doubt regarding Sprint's plans with Ericsson. They can position this as a desperate move of a declining carrier who has still not figured out how to stave off customer defections.

• Although all carriers could consider a similar proposition to save OpEx costs, it is not necessarily recommended unless they need to something radical to change their financial model or turn their business around. The cons of customers possibly doubting the capabilities of their carrier to run its own network are not worth the risks unless severe changes are required due to market conditions.

Recommended End User / Customer Actions

• The transfer of Sprint network operations to Ericsson should be transparent to business customers, but enterprise IT teams will want to be on high alert for any hiccups in the customer support process. These teams should ask for a calendar with any significant conversion dates, and keep a close eye on their network on those dates. They should also request that Sprint keep them notified of network changes.

• Businesses that are considering a deal with Sprint may want to take a wait and see position for the short term if possible to ensure that the transition is smooth. A global wireline carrier as large and pervasive as Sprint should be a safe bet, and the large-scale transfer of employees is encouraging in terms of suggesting a smooth transition.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Wireless Services - U.S. | More information
| Client access - Full report in Enterprise Mobility - U.S. | More information
| Client access - Full report in Business Network Services - U.S. | More information
| Client access - Full report in Wholesale Telecom Services | More information

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