Sprint Nextel’s new CEO, Dan Hesse, has a tough job, not only to turn around the ailing operator but also to convince a sceptical Wall Street that he is the right man for the task. Less than a month into the role, he has presided over two actions that make very public statements about Sprint’s recovery plan ‘ going ahead, on schedule, with the soft launch of the much questioned Xohm WiMAX service; and announcing a further round of staff cuts that is likely to number several thousand. The decisions seem designed to show that Hesse and his new regime can combine the vision of former CEO Gary Forsee, who was a huge personal supporter of the Xohm plan to put Sprint into the vanguard of US 4G services; with the operational efficiency and cost discipline Forsee disastrously lacked.
Hesse, who was hired in December from Sprint local lines spin-off Embarq after a long headhunting process, seems determined to demonstrate to investors at the first opportunity that he will instill a new commitment to efficiency. The lay-off program will involve several thousand jobs, according to sources, though the scale has not been officially announced. Sprint Nextel has about 60,000 employees and laid off 5,000 last year. The new CEO aims to address several operational issues that have lain untouched since the difficult Sprint Nextel merger in 2005. For instance, he is considering creating a single headquarters in Overland Park, Kansas, and a more centralized management structure, in order to streamline decision making. To date, Sprint has retained the former Nextel base in Reston, Virginia as its official HQ, even though many senior executives and 13,000 employees are based in Overland Park. A shift of the center of power might be efficient, but would also be seen as a concrete symbol of one of the chief causes of unease about Hesse as CEO ‘ his strong Sprint roots, which may prolong rather than paper over the continuing and damaging feud between Sprint and Nextel supporters, at executive and board level (this feud meant a proposal by SKT to take a stake in Sprint was stillborn, as the Korean operator was insisting on bringing back former Nextel chief Tim Donahue as CEO).
One of the most closely watched decisions that Hesse will need to make before too long is whether to pursue the Xohm mobile broadband business plan relatively unchanged, or whether instead to scale it back, sell off the unit, or place it into a joint venture, such as a revived version of the failed Sprint-Clearwire deal to combine their 2.5GHz spectrum, networks and brands. It is almost certain that Hesse will pull back the costs and/or timescales of the Xohm build-out in order to reassure nervous shareholders and reduce overheads, perhaps to the minimum required by the FCC rather than the current target of covering 100m people by the end of this year. A venture with Clearwire would be a constructive way to do this, since it would share the cost load while still supporting a sufficiently ambitious business plan to achieve Sprint’s goal of leapfrogging Verizon and AT&T in the 4G race. A far more negative choice, in terms of Sprint’s medium term competitiveness, would be to sell off Xohm, close it or decimate the scale of the plan. Another carrier would almost certainly pick up the exceptionally valuable spectrum, and the chance to create a world beating mobile broadband service, and so US consumers would not miss out ‘ but Sprint would certainly never find such an opportunity again to remain in the forefront of US telecoms.
While Hesse’s background and strong focus on cost cutting may suggest he will not be as favorable to Xohm as his predecessor, the soft launch did at least go ahead, and with a fanfare that suggested Sprint had certainly not closed its options in this area. The carrier announced the launch of its service at last week’s Consumer Electronics Show in Las Vegas, along with a string of new partners. The first cities to gain WiMAX offerings are Baltimore, Chicago and Washington DC, with one of Sprint’s infrastructure vendors ‘ Samsung, Motorola and Nokia Siemens ‘ building out each one.
Perhaps the most significant new partnership is with billing giant Amdocs, addressing common misgivings about whether WiMAX operators yet have the same quality of billing and BSS/OSS functionality available to them as the cellcos. Amdocs signed a multiyear agreement to build and maintain the Xohm customer portal, plus customer relationship management, service activation, and provisioning and billing systems.
Also in the services area – and also geared to the business customers that, for all the promised gadgetry, will be essential to early revenues ‘ are McAfee for online security services, eTelecare Global Solutions for customer care, and SwapDrive for a hosted remote storage system, allowing subscribers to organize, manage and access their digital content.
‘The new service agreements and device commitments will help Xohm subscribers access, enjoy, store and secure personal digital and user generated content while experiencing new device innovation,’ claimed Barry West, Sprint’s head of Xohm and 4G services.
On the device side, ASUSTek of Taiwan promised embedded devices for Xohm, as well as an 802.16e version of its tiny Eee notebook with preloaded Windows XP. OQO also joined the line-up, previewing an ultra-mobile PC, and existing device partner Zyxel announced a chip partnership with Sequans of France.