mocoNews - Report: Sprint Considering Cost-Cutting Network Outsourcing Deal With Ericsson

Sprint (NYSE: S) Nextel is in "final negotiations" to outsource the management of its cellular network to Telefon AB L.M. Ericsson (NSDQ: ERIC), as the struggling carrier tries to cut costs to help offset customer defections, according to the Wall Street Journal citing "people familiar with the matter." The US's third largest carrier is posting earnings today, and is expected to report the loss of one million more subscribers. Negotiations with Ericsson are expected to continue for a few more weeks, and may not be concluded at all, but according to the WSJ's sources these are the points of the deal:

?Sprint may end up paying equipment supplier Ericsson as much as $2 billion over several years to manage their networks, which would help them cut their maintenance costs by about 20 percent.

?Aside from the cost savings, Sprint is said to be looking at the outsourcing deal as a way to "free up resources" to allow it to concentrate on product development, marketing and strategic partnerships.

?If Sprint goes ahead with the Ericsson deal, it would retain ownership of its towers and be responsible for capital investments.

?The deal might also mean layoffs at the carrier, but Sprint is hoping that Ericsson will keep as many workers as possible to build out its US outsourcing business.

Though US carriers still prefer to manage their own networks, outsourcing is gaining more acceptance in Europe and Asia. In March, Vodafone (NYSE: VOD) struck a network management deal with Ericsson for its UK operations, while France Telecom (NYSE: FTE) signed a similar agreement with Nokia (NYSE: NOK) Siemens to maintain its networks in the Spain and the UK.

Ericsson has been particularly aggressive in pursuing Sprint's business, beating out Alcatel Lucent and Nokia Siemens, which WSJ sources said pulled out of the bidding because the deal wouldn't be profitable for it. This may also be true for Ericsson, but the telecoms equipment provider may be willing to take a loss to get into the "lucrative" North American market.

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