Ericsson to manage Sprint network in $4.5-$5billion deal

By Sinead Carew

NEW YORK (Reuters) - Sprint Nextel Corp (S.N) said it would pay Ericsson (ERICb.ST) $4.5 billion to $5 billion to manage its network under a 7-year deal in which 6,000 Sprint workers will move to Ericsson. Sprint shares rose 4 percent.

Sprint said it would keep full control of its network after the deal, which is the first of its kind for a major U.S. operator. Sweden's Ericsson said the deal would initially hurt margins but provide "satisfactory" profits over seven years.

The No. 3 U.S. mobile service provider said Ericsson would help improve its network performance more efficiently than it could on its own. It also plans to plow any savings from the agreement into improving its network coverage.

"This is about improving our customer experience," Steve Elfman, Sprint's network operations head, said on a call with reporters on Thursday. "While we get the benefit of Ericsson's expertise ... we can focus our attention on bringing great devices, great services, great applications to them."

Investors will closely watch for any impact on Sprint's network performance as the service provider has been struggling to stem customer losses partly related to a poor reputation for network quality that it has been working to shake off.

However, analysts said they did not expect the quality of Sprint's wired or wireless network to suffer from the management handover.

"If anything, I think the reverse is true," said Soleil analyst Michael Nelson. "It actually appears that by making this move they're attempting to strengthen the quality of the network. There's always the potential for increased risk when you have a deal of this magnitude but I think its minimal."

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