Sprint outsources network to Ericsson

The seven-year deal is valued at up to $5 billion and transfers 6,000 Sprint employees to Ericsson, which will handle all day-to-day operations.

Larry Dignan

This was originally posted at ZDNet's Between the Lines.

Sprint Nextel will outsource its network to Ericsson in a seven-year deal valued at $4.5 billion to $5 billion.

The deal, announced Thursday, allows Sprint to offload the costs associated with running its network. Sprint will transfer 6,000 employees to Ericsson.

Ericsson will now handle all the day-to-day operations and maintenance. The transfer of the network and the employees that go with them is set to happen by the end of the third quarter.

Steve Elfman, Sprint's president of network operations and wholesale, said on a conference call that Sprint still owns its network and is responsible for strategic plans and investments. Elfman added that the goal is to improve the quality of the network and deploy next-generation technologies. Sprint will keep its customer service operations.

Sprint didn't disclose exact numbers on savings. Elfman said Sprint expects to cut cost per labor unit. Sprint will also avoid investment in the tools that Ericsson already has. Economies of scale will enable Sprint-Ericsson to cut costs on software licenses and other expenses. Those savings will be invested in expanding network coverage.

Among other key parts of the deal:

• Sprint chooses technology platforms and vendors.

• Ericsson maintains Sprint's wireless and wireline networks.

• Ericsson will optimize Sprint's inventory of network assets.

• Ericsson and Sprint will focus on improving processes.

• No layoffs are anticipated due to the deal and Ericsson will set up shop in Overland, Kan., Sprint's headquarters.