WASHINGTON (Reuters) - Sprint Corp (S.N) announced on Monday it will fire 2,000 employees and it cut its 2014 adjusted earnings forecast as the company attempts to reduce costs and turn around several quarters of losses.
The layoffs are expected to lower labor costs by $400 million a year and are the latest job cuts by the third largest U.S. carrier.
The company reduced its forecasts for 2014 adjusted earnings to between $5.8 billion and $5.9 billion from $6.7 billion to $6.9 billion.
“My job as CEO is to make sure that all costs reflect the value that we are going to provide to the market. I said on day one to all my employees that we were going to take costs out and there will be layoffs,” Marcelo Claure told Reuters in an interview.
More job cuts are not expected, although the company is always looking for ways to cut costs, he added.
Sprint expects to eliminate $1.5 billion in annual expenses, and hopes the cuts will offset service revenue declines as contract customers switch carriers.
“He has to cut costs, that’s the easiest away to show he is doing something overall,” said Roger Entner, analyst at Recon Analytics. “He needs to get aggressive with pricing to attract more customers, but most importantly he needs a better network.”
Sprint has been undergoing a painful revamping of its network that has caused a mass exodus of subscribers. The carrier, which appointed Claure as chief executive officer in August, has been cutting prices aggressively, doubling the data its competitors offer.
The company also named Junichi Miyakawa as technical chief operating officer last Friday. Miyakawa will oversee Sprint’s network as the company completes its network overhaul.
“We’ve decided to make some leadership changes. More changes are coming,” Claure warned.
Sprint shares dropped 7.74 percent to $5.72 in after-market trading after closing at $6.20 on the New York Stock Exchange.
Sprint reported a loss of 19 cents per share, well below analyst expectations of a loss of 6 cents per share, according to Thomson Reuters I/B/E/S.
The company expects earnings before interest, taxes, depreciation and amortization in 2015 to be neutral to modestly higher.
Sprint said it lost 272,000 contract wireless subscribers in the third quarter, more than Wall Street analysts anticipated.
Sprint, which is 80 percent owned by Japan’s SoftBank Corp (9984.T), said its operating losses narrowed to $192 million, or 19 cents per share, in the third quarter, from a loss of $398 million, or 24 cents per share, in the same quarter a year ago.
Revenue rose to $8.5 billion from $7.7 billion in the year-ago quarter, slightly below the average analyst estimate, according to Thomson Reuters I/B/E/S.
Reporting by Marina Lopes; Editing by Lisa Shumaker and Andre Grenon