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Sprint Nextel CEO Gary Forsee Steps Down
October 9, 2007, from The Wall Street Journal.
Gary Forsee stepped down as chairman and chief executive officer of Sprint Nextel Corp. as the wireless carrier warned investors that it continues to lose high-value subscribers and won't meet its previous financial targets.
Mr. Forsee's resignation came days after news broke, in The Wall Street Journal, that the board had a search under way for a successor. That made it impossible for him to continue working, according to one person familiar with the situation. "His ability to function was undercut by events," this person said.
Mr. Forsee didn't respond to phone and email messages. Sprint spokeswoman Leigh Horner said he was unavailable for comment. She said the board decided to find a successor to Mr. Forsee because "it is the right time to put in place new leadership to move the company forward."
The company's chief financial officer, Paul Saleh, will be acting CEO while the board continues its search. James Hance Jr., a board member, will take over as nonexecutive chairman, the company said. Mr. Hance also will assume the responsibility of lead independent director previously held by Irvine Hockaday.
Mr. Hockaday, who will stay on the board, said in a statement the company's search for a CEO is focusing on external candidates, but he didn't elaborate on individuals who have been approached. Two former Sprint officials are among the top contenders, according to one person close to the situation. They are Andrew Sukawaty, who now runs satellite-communications provider Inmarsat PLC, and Dan Hesse, CEO of Embarq Corp., formerly Sprint's local-phone division.
Last week, when speculation about Mr. Sukawaty surfaced, Inmarsat declined to comment. The company recently granted him a long-term incentive plan. Mr. Sukawaty "is the guy to beat," and has been the favorite prospect so far, the person close to the situation said. He was a candidate when Sprint recently conducted a search for a new chief operating officer, an effort it shelved when it decided to displace Mr. Forsee.
Mr. Hesse runs Embarq, a Sprint spinoff, from Overland Park, Kan., Sprint's former headquarters. Some Sprint board members believe Mr. Hesse "is the answer" for the CEO spot, the knowledgeable individual added.
"We fully expect that the search will be concluded in a timely manner and we are focused on selecting the right candidate to guide the company to achieve its full potential," Mr. Hockaday said in his statement. "Sprint Nextel has the assets, spectrum, customer base and technology to be the leader in wireless-mobility services."
According to Sprint's latest proxy, Mr. Forsee would have been eligible for an exit package valued at about $55.5 million if he had ended his employment Dec. 29, 2006.
Mr. Forsee, 57 years old, is leaving just two years after forging Sprint's $35 billion acquisition of Nextel in 2005. But he had a tough time bringing together the two companies, with their vastly different cultures and wireless technologies. Sprint's performance has suffered. Subscriber growth sputtered over the past year, and customer service deteriorated. Sprint's planned investment of $5 billion in a new wireless broadband network based on WiMax technology has further spooked some investors.
Mr. Forsee had promised Wall Street a turnaround -- and in the second quarter, he partly delivered. But investors began to sense things were once again getting worse, a trend the company confirmed yesterday. Sprint said it expects to report a third-quarter net loss of about 337,000 subscribers in the important "postpaid" market segment -- customers who sign annual contracts and pay monthly bills. The company also lowered its guidance for annual revenue and adjusted operating profit in 2007. Sprint reports third-quarter results Nov. 1.
Also yesterday, Vonage Holdings Corp. agreed to pay Sprint $80 million in a licensing deal that covers patents tied to connecting Internet phone calls. (See related article.)
Mr. Forsee's departure reduces the likelihood of a proxy fight by a disgruntled major shareholder. Last week, activist investor Ralph Whitworth told The Wall Street Journal he had lost confidence in Mr. Forsee. He threatened a proxy fight for board seats unless Sprint directors immediately dealt with the company's leadership issue. Mr. Whitworth's Relational Investors LLC owns roughly 1.9% of Sprint's shares outstanding. In an interview yesterday, he said "it seems unlikely" Relational now will pursue a proxy fight. "There's a whole new dynamic," he continued. The final decision "will depend on how vigorous the [CEO] search process is and the outcome."
As part of the talks over his exit package, Mr. Forsee asked the board to shift Sprint's headquarters back to Kansas from Reston, Va., where Nextel had been based. Sprint had continued to maintain a large corporate presence in Kansas, however.
Mr. Forsee "believes the headquarters of Sprint should be where the overwhelming majority" of its employees work, the individual with knowledge of the situation said. Sprint employs nearly 59,000 people.
The headquarters shift "was a substantial and key negotiating point," this person said. "He was not going to resign until he got most of what he could get" on this issue. The informed individual doesn't know whether Mr. Forsee got that commitment. On the financial side, the person said, Mr. Forsee "is not a guy looking to hold up a company."
Mr. Hance, 63, is a senior adviser to private-equity firm Carlyle Group who has been on Sprint's board since 2005. He was chief financial officer of Bank of America Corp. from 1988 to 2004. Mr. Saleh, 50, has been Sprint's finance chief since the Nextel acquisition.
I’m undecided
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Inappropriate?I think that Sprint was really starting to shape up. Their new marketing is so much better. Their selection of handsets has really gone up a notch (they really missed the boat with the first Razr, but I'm ecstatic that Sprint was the first carrier to get the Razr 2). They are definitely pouring it into network improvements and filling out their coverage. Sprint was struggling before; these things take time. Was it really time for Forsee to go? Maybe, maybe not.
I think the merger with Nextel was a mistake, however. Sprint and Nextel use completely different cell phone technologies, so how could merging bring any benefits? I don't see what they were thinking. Sprint should have merged with/acquired another CDMA carrier (Alltel?) so they could expand their native coverage without picking up and having to maintain two completely different types of networks.
I think the company's downfall is its customer service, though, as it is definitely lacking. I hope the new CEO will realize that customer service is a key component in such a competitive environment and take steps in the right direction.2 Comments
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Well It's a year later and literally millions of subscribers have deserted these liars for good. -
Well It's a year later and literally millions of subscribers have deserted these liars for good.
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Inappropriate?The problem is that there are so few innovators in the realm of customer service. Let's face it, most people don't consider it a sexy career track as they think of dehumanizing processes and operational headaches. So the customer service jocks just use more of the same--call centers with cheap labor and more rigorous control metrics and top-heavy scripts. Where are the ideas?
You're right, though, it's got to start with the CEO. Good customer service has to be "in the DNA." PG&E (the energy company here in Northern California) is attempting to change it's own DNA after an embarrassing bankruptcy. The key is that they're focusing on two things: providing tools to every operator to answer *all* of a customers needs and creating company-wide bonus structure oriented around their customer satisfaction score.
Here's an article about their approach, though it focuses too much on the technology:
http://findarticles.com/p/articles/mi...
Quote: "A good deal of the rearchitecting investment stems from shifting ... from an account focus to an overall customer perspective. As simple as it sounds in hindsight, that point of view was not factored into the original system design."
I’m slightly hopeful they can change
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Inappropriate?Just a note on Sprint's customer service - one of the ways they're trying to improve is moving their outsourced centers to higher-quality, dedicated customer service providers in Canada. Nextel has had several outsourced centers in Canada with a stellar track record, and Sprint has taken notice.
The merger with Nextel seemed like a good idea at the time, I'm sure. Both providers had a different customer base: Sprint had many general consumers, and Nextel catered to businesses. From a corporate standpoint, a merger that increases your customer base without crossover is a no-brainer.
The implementation of that merger, however, hasn't proven to be a benefit in all cases.
Sprint and Nextel use incompatible networks. CDMA and iDEN are two very different technologies. Since the merger, Sprint has pursued the idea of a Hybrid device, using CDMA for it's voice and data services, and iDEN for walkie-talkie/direct connect. So far that's been met with a lot of complication: high battery drain in the devices when not receiving coverage from both networks, lack of a smartphone in the lineup, and lack of an affordable consumer model. Plus, implementing Hybrid phones in the billing system is a true headache.
Speaking of the billing system, this is one area where the merger will eventually have a positive effect. Sprint and Nextel each had their own billing systems, with Nextel's easily being the superior platform. Sprint has been in the process of converting its millions of accounts from it's legacy billing platform into the Nextel system, resulting in a universal platform that will make customer service so much easier. The conversion process itself can result in some hiccups and inconveniences, and to those affected by an account conversion issue, I apologize. In the long run, it will make things so much better.
Things with Sprint are awfully hectic right now, between the drive to seriously improve our level of customer service, to migrate accounts into the unified platform, and testing new technologies. A year from now, I expect Sprint will be a very different, vastly improved wireless provider.
I’m stressed, but optimistic
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Inappropriate?We're not interested in your internal company problems. That's a common occurrence at problem companies, they like recount their internal situation and policies to customers.
We're frankly not interested, we just phone service. With that in mind, customer service should be given at point of sale. If you can open a store, and train salespeople, then those salespeople should be the ones to have to give customer service. That way, at least there is SOME dis-incentive from lying. If they lie to you, then they are right there and you can go back to them and ask why they lied and demand that whatever they lied about be corrected.
Right now it becomes a he said she said situation where these rotten sales people lie to your face, and then if you have an issue it's "oh so sorry, you must call customer service, bu bye."
I’m bored with sprint employees posting nonsense
