Sprint Appears To Have Turmoil in The Executive Office

Sprint's Forsee May Run Out of Time to Win Back Users
By Crayton Harrison and Amy Thomson
Oct. 4 (Bloomberg) -- Sprint Nextel Corp. Chief Executive Officer Gary Forsee may have run out of time to win back mobile- phone customers from AT&T Inc. and Verizon Wireless.

``They're not even doing the basic things correctly,'' said John Krause, an analyst at Thrivent Financial for Lutherans in Appleton, Wisconsin, which manages about $68 billion including Sprint shares. A change in leadership ``isn't going to hurt.''

Sprint, the third-largest U.S. wireless carrier, lost about 700,000 monthly contract customers in the past year as competitors lured away subscribers with handsets such as Apple Inc.'s iPhone. The Wall Street Journal reported today that Sprint's board, responding to displeased investors, is looking for Forsee's replacement.

Activist shareholder Ralph Whitworth said he has ``lost confidence'' in the CEO, the Journal reported. Sprint should also consider selling its long-distance business and fiber-optic network, Whitworth told the newspaper.

The Reston, Virginia-based company added 16,000 customers last quarter, its first increase in monthly subscribers in a year. AT&T, the largest wireless company, attracted more than 900,000 new contract customers, while Verizon Wireless, the second biggest, added 1.5 million.

Nextel customers also have griped about poor reception and dropped calls since Sprint bought the company for $36 billion in 2005. Sprint posted a 95 percent drop in second-quarter profit because of costs from that purchase and expenses to fire employees.

`Under Pressure'

``Their competitive position is under pressure right now,'' said Christopher Watts, an analyst at Atlantic Equities LLP in London. He rates Sprint shares ``underweight'' and doesn't own them. ``Attracting subscribers and changing perceptions about your network and your product takes time.''

Sprint advanced 52 cents, or 2.8 percent, to $19.28 at 4:04 p.m. in New York Stock Exchange composite trading. The shares have risen 2.1 percent this year. Sprint spokesman James Fisher declined to comment. Whitworth also declined to comment.

Whitworth, whose Relational Investors LLC owns about 1.9 percent of Sprint's shares, didn't specifically ask for Forsee to resign, saying responsibility lies with the board, the Journal said.

Whitworth had greater confidence in Forsee in May, saying in an interview that executives ``understand what needs to be done'' and ``have their focus right'' by concentrating on improving the company's operations.

Forsee, 57, quit his job as vice chairman of BellSouth Corp. in 2003 to run Sprint. He reorganized the company and fired thousands of employees. The following year, he said he wanted to buy Nextel to add subscribers.

Nextel Purchase

Sprint is still working to absorb Nextel's operations. It also has to integrate two billing systems, a process that may confuse subscribers who receive new bills, Forsee said last month at an investor conference.

The company started a new advertising campaign in June after its previous marketing, using the slogan ``Power Up,'' failed to resonate with customers. Forsee replaced Sprint's top marketing executive and hired a new agency to oversee the revamped campaign.

A deteriorating housing market may also have hurt Sprint more than competitors because some Nextel customers have lower credit, said Jonathan Atkin, an analyst at RBC Capital Markets in San Francisco. Sprint will probably report a loss of subscribers for the third quarter, he said.

``It's not clear when that turns around in a sustainable way,'' said Atkin, who rates the shares ``sector perform'' and doesn't own any.

WiMax Investment

Forsee is looking to new technology to bolster growth. He plans to invest as much as $5 billion to build a high-speed network using a technology called WiMax. Sprint expects to generate as much as $5 billion in 2011 sales from the network.

``They're looking for WiMax to be a growth driver for the company,'' said Todd Rosenbluth, an equity analyst at Standard & Poor's in New York. ``We're more skeptical at this point and think Sprint Nextel has to focus on growing and winning back customers using the current technology.'' He rates the shares ``hold'' and doesn't own any.

Sprint has to fix its main mobile-phone business, even if that means slowing the WiMax investment, said Thrivent's Krause.

``They haven't done really that great a job with the fundamental block and tackling,'' he said. WiMax is ``just another distraction that they don't need, and that's what Relational is pointing out.''
Via Bloomberg.com





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