Jan. 26 (Bloomberg) -- Sprint Nextel Corp., the money-losing U.S. wireless carrier, decided to cut about 8,000 jobs, slashing expenses further to fight off the recession.

The reductions are aimed at lowering annual expenses by $1.2 billion a year, Sprint said today. They account for about 14 percent of the workforce and will occur across all levels.

Sprint joins larger rival AT&T Inc. in trimming payrolls amid the worst economic slump since the Great Depression. Sprint also has suspended pay increases and contributions to retirement plans to help pare expenses. Americans filed almost 600,000 initial jobless claims in the week ended Jan. 17, matching the highest level in 26 years.

“It’s a difficult industry in which to shrink your way to greatness,” Stifel Nicolaus & Co.’s Christopher King said in an interview from Baltimore. “Investors would much rather see the company growing this business, hiring people.” The analyst advises investors to hold onto the shares and doesn’t own them.

Sprint, based in Overland Park, Kansas, rose 2 cents to $2.48 in New York Stock Exchange composite trading at 9:41 a.m. The shares had dropped 74 percent in the past year before today.

The carrier said it repaid $2 billion in debt in the second half of 2008, helping to reduce its interest burden. Companies have renegotiated financing to cope with a freeze in credit markets, spurred by the collapse of at least 25 lenders hurt by losses tied to the subprime mortgage market.

Both Moody’s Investors Service and Standard & Poor’s rank the company below investment grade. Sprint had more than $20 billion in total debt as of the end of September.

Severance Expense

The carrier plans to incur costs of at least $300 million in the first quarter for severance. Sprint also plans to release fourth-quarter results Feb. 19, earlier than first announced. The company had lost more than $1 billion through the first three quarters of 2008 as customers fled to larger rivals including AT&T and Verizon Wireless.

Sprint has about 56,000 employees, according to spokesman James Fisher. The company is working to ensure the cuts won’t hurt customer care or network quality, he said.

The cuts include 850 positions eliminated under a voluntary buyout plan Sprint started last year. Last month, AT&T, the second-largest U.S. phone company by subscribers, decided to reduce its workforce by 12,000 positions.

“Labor reductions are always the most difficult action to take, but many companies are finding it necessary in this environment,” Sprint Chief Executive Officer Dan Hesse said in a statement.

To contact the reporter on this story: Amy Thomson in New York at Athomson6@bloomberg.net

Last Updated: January 26, 2009 09:44 EST