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Sprint PCS looks toward outsourcing

The telephone company is expected to announce a new outsourcing plan, as its wireless division continues to lose money.

Telephone provider Sprint is expected to announce a major outsourcing initiative this week to help reduce costs in its wireless business, which continues to rack up losses.

On Tuesday, the company announced its earnings for the fourth quarter of 2003. While its wireline phone business posted higher income in the fourth quarter, its PCS wireless business widened losses.

The Overland Park, Kan.-based telephone company said fourth-quarter earnings for its traditional phone business totaled $360 million, or 40 cents a share. But because of stiff competition, sales remained relatively flat at $3.54 billion compared to the previous quarter.

Meanwhile, the Sprint PCS wireless business lost $322 million, or 31 cents a share. Wireless revenue rose 8.4 percent to $3.31 billion, as the unit added more than 1 million net subscribers, including 390,000 direct customers. But in order for the company to reach profitability, it will have to cut costs.

As a result, Sprint is expected to announce a more aggressive outsourcing plan on Wednesday at its analyst conference in New York. Industry observers said the company will likely outsource between 5,000 and 6,000 jobs in its customer care unit, mostly in its PCS division. The cuts could save the company between $2 billion and $3 billion.

The Wall Street Journal reported on Tuesday that IBM will get the bulk of the outsourcing business, but a source close to the companies told CNET News.com that IBM will only get a small portion of the contract. Sprint is expected to hire private contractors to take on much of the business.

Neither Sprint nor IBM would comment on the outsourcing arrangement.

Outsourcing has become increasingly popular among telecommunications companies, as they struggle to reduce costs and grow revenue. Many companies are moving customer care service and information technology overseas to such places as India, where companies can drastically cut salary expenses to lower-wage employees.

Sprint has already begun relocating some of its customer care functions overseas, and it began shifting information technology units overseas in the fall of 2003.