Sprint Nextel Corp is starting the process of eliminating up to 2,500 jobs or 6% of its workforce this quarter as part of an effort to shave at least USD 350 million off its annual expenses.

Along with the elimination of 2,000 to 2,500 jobs, Sprint said it would also cut back on the use of outside labor including contractors, resulting in 60% of the USD 350 million projected savings, the company said on Monday.

Sprint, which has about 42,000 workers, forecast a USD 60 million to USD 80 million charge this quarter for severance payments and other costs related to the latest round of layoffs, which follows 8,000 job cuts already this year.

This adds up to a total workforce reduction of 16,500 for Sprint this year, including the September transfer of 6,000 Sprint employees to Ericsson after the Swedish company agreed to manage Sprint's network.

One analyst said the savings would not make a big difference for Sprint, which would still have high costs.

"Financially, it helps," said Stifel Nicolaus analyst Christopher King, but he added: "USD 350 million in annual expense savings isn't much for a company that has roughly USD 26 billion in annual operational expenses."

On October 29, Sprint posted a third-quarter loss of USD 478 million, or 17 cents a share. It ended the quarter with a balance of USD 5.9 billion in cash and cash equivalents and forecast positive free cash flow for this quarter.

The No. 3 U.S. mobile service said many of the job cuts would happen by the end of December and would include jobs across the entire company, including layoffs in its wholesale unit.

Last week, Sprint, which has been working on stemming customer losses in its mobile business, said it was planning dozens of layoffs in its wholesale business due to a lack of growth in its landline business.

Sprint shares closed up 58 cents, or 20%, at USD 3.43 on New York Stock Exchange after the news.