Oct 18, 2001 12:00 PM,

Sprint axes ION, 6000 employees

Vincent Ryan

Sprint finally pulled the plug on its ION network, saying it could not wait for the economy to rebound to see a return on its investment in the $5 billion, two-year convergence project. The company also eliminated 6000 jobs and 1500 contractor positions, and froze new customer development in its fixed wireless business.

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About 1100 of the employee cuts will come from the Sprint Local division, 4000 from the Global Markets group, and 900 from corporate functions. “We now see the prospect of a longer economic slowdown and a continued softness in topline growth,” said Michael Fuller, president and chief operating officer of the local services unit, in explaining the cutbacks.

Sprint said ION customers will be migrated to alternative service providers, but Sprint didn’t elaborate on who they might be. The company’s 52,000 MMDS customers will still be served by Sprint, but the company expects the operations will continue to generate losses.

“We will continue to serve the customers we have and will closely monitor developments of second generation fixed wireless services that may make the economics of delivery viable,” said Ron LeMay, Sprint’s president and chief operating officer.

The winding down of ION and the workforce reductions will force Sprint to take an estimated $2 billion pre-tax charge to fourth quarter earnings. Cash costs are projected to be $600 million, with $200 million of that going to severance packages.

Beginning in 2002, Sprint said it will see a $1 billion annualized pre-tax savings from the termination of ION.

Sprint FON group’s third quarter net income fell about 36% to $244 million, while revenues declined 4.5%. Access lines and data and long distance revenues all declined sequentially. Sprint expects the trend to continue in the fourth quarter, depressing revenues by about 5% compared to last year.

Sprint Corp. is projecting earnings per share of 35¢ to 39¢ and EBITDA of $1.2 billion. It cut its 2001 capital expenditure budget to $5.4 billion from $5.9 billion.