Sprint estimates additional $2.5 billion cost savings

Sprint today said it has recalculated the value of its acquisition of Nextel Communications and is now estimating that the combined companies will enjoy a $14.5 billion in savings over the costs of operating separately. The estimate is $2.4 billion higher than its original pre-acquisition estimates.

“Since our merger announcement, we have looked deeper into our operations and identified additional value creation opportunities,” Sprint CEO Gary Forsee said.

Of that figure, $1.6 billion in savings come from increased revenue due to cross-selling opportunities. $3.7 billion comes from eliminating data overlay network for Nextel’s iDEN footprint, cell site co-location and integrated IT and billing systems. Another $2.3 billion comes from network operations savings due to lower site rent and maintenance, lower transport costs and staff layoffs. A huge $4.4 billion comes from the consolidation of IT, billing and customer care. And $3.5 billion comes of unifying the two carriers marketing, sales and fulfillment activities, Sprint officials said.

Those savings will be offset by $800 million to $1 billion in network integration costs this year, followed by gradually declining costs over the next three years. In 2006, integration costs will fall between $300 million and $500 million, and in 2008 are expected to be less than $100 million. This year, Sprint expects $5.6 billion in capex for all its wireline and wireless assets, plus $900 million to reband the iDEN network. The 2006 capex is expected to be $7 billion total.