Sprint to Save $1 Billion by Moving Cell Towers

January 15, 2016 by Paul Ausick

In what may be the first move in a larger round of cost cutting at the fourth-largest U.S. wireless carrier, Sprint Inc. (NYSE: S) is expected to slice $1 billion from its expenses by moving its leased tower space from private property owners to locations on government-owned properties where rents are cheaper.

While this may be good news for Sprint, it is not good news for tower lessors like American Tower Corp. (NYSE: AMT) and Crown Castle International Corp. (NYSE: CCI). Moving the towers could begin this summer according to a report from Re/code published early Friday afternoon.

Back in October Sprint CEO Marcelo Claure reiterated his goal of becoming the first- or second-rated wireless network in the country, and part of the plan is to shave at least $2 billion from the company’s expenses. Moving the cell towers accomplishes half the job because renting space for the towers is one of the largest expenses for a wireless carrier.

According to Re/code another large expense for Sprint has been paying Verizon and AT&T $1 billion a year to use their landlines to connect to a Sprint cell tower. This so-called backhaul expense would be eliminated if Sprint goes ahead with its plan to use microwave technology instead.

Job losses are virtually inevitable and Re/code cites sources who say that Sprint plans to fire a “significant number” of workers on January 22.

The news has not helped Sprint’s share price which is down more than 6% in mid-afternoon trading at $3.19 after posting a new 52-week low of $2.93 earlier this morning. The stock’s 52-week high is $5.45.

American Tower’s stock traded down about 2% at $90.35 in a 52-week range of $86.83 to $104.12, and Crown Castle’s stock has tumbled 4.3% to $80.35 in a 52-week range of $75.78 to $89.44.