Kansas City: As Sprint Nextel Corp. looks to replace ousted Chairman and CEO Gary Forsee, the wireless carrier has reached another crossroads in shaping its future.
Forsee stepped down after four years as head of the Reston, Virginia-based company, bowing to pressure from investors and directors unhappy with Sprint’s continued weakness in attracting and retaining customers.
Analysts weighed in with suggestions on how the company should change its direction with a new chief executive, starting with what they say are Sprint’s biggest weaknesses:
* Lack of distinctive brand personality in a highly competitive cell phone market
* Raft of operational and marketing issues tied to the $35 billion acquisition of Nextel Communications Inc. in 2005
Tough road for new CEO
“The new CEO will benefit from the completion of merger integration efforts already under way, but must grapple with larger issue of making Sprint relevant in the marketplace,” said Thomas Watts, a telecommunication analyst for Cowen and Co.
Sprint, with operational headquarters in Overland Park, Kansas, has struggled since the Nextel purchase as technical problems and sometimes unfocused marketing allowed competitors AT&T Inc. and Verizon Wireless to snatch up customers and market share.
Sprint’s efforts to weed out people with low credit who are less likely to pay their bills on time has slowed growth further and led to a year of subscriber losses.
Sprint expects a net third-quarter loss of 337,000 monthly subscribers and expects it to miss previously announced targets for annual operating profits and revenues.
Sprint announced in July it would team up with Clearwire Corp. to build out the WiMax system, with the network beginning in Chicago, Baltimore and Washington, D.C., by the end of the year and rolling out nationwide next year.
Industry insiders, some of whom have criticized WiMax as too experimental and costly, checked if WiMax would have a future without Forsee.
Have a ‘back to basics’ strategy
Jason Armstrong of Goldman Sachs feels the company should focus on a “back to basics” strategy, trying to beef up customer service and technology improvements.
“In contrast, we would expect longer term initiatives, such as the Clearwire WiMax partnership, to be on hold and subject to review by a new leadership team,” Armstrong wrote in a research note.
UBS analyst John Hodulik laid out a more radical recipe for change in his investor report, recommending Sprint sell its long-distance network and, while not canceling WiMax, sell part of it as an initial public offering once an agreement with Clearwire is reached.
He also recommended the company speed up its efforts to move all of its Nextel customers, who now use a network technology called iDen, to Sprint’s CDMA network, which is more dependable and provides more lucrative data services, such as Internet access and texting.
The press-to-talk feature that long characterized Nextel and made it popular with small businesses like construction crews and taxi companies, would be replaced with a technology called QChat.
Bank of America analyst David Barden, told investors that the top level change was a more time-consuming and perhaps less satisfying short-term choice for stockholders, but the only choice to preserve long-term integrity of Sprint Nextel.
Charles Golvin, a senior analyst for Forrester Research, said he doubted most consumers would notice the turmoil in the corporate offices at Sprint and care more about whether their calls are going through.
But he said Sprint’s new leadership would have to find a new way to speak to those consumers who know Verizon for its quality network, AT&T for its bundled telecommunication services and T-Mobile for its value offerings.
“They need to craft a more accessible message to the market of what the Sprint brand means and why customers should want to use it,” Golvin said.