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Among the rumors surrounding Sprint’s anticipated merger with T-Mobile was news that the latter’s boisterous ringleader and CEO, John Legere, would head the new combined company.
Last week, amid news that the merger plans had fallen apart, Sprint majority shareholder Softbank seemed to decide to stay true to its plan for a new CEO and announced that Marcelo Claure—the founder of device distributor Brightstar, of which Softbank purchased a majority share in January—would be replacing Dan Hesse.
“While we continue to believe industry consolidation will enhance competitiveness and benefit customers, our focus moving forward will be on making Sprint the most successful carrier,” Sprint Chairman and Softbank CEO Masayoshi Son said in a statement, offering what passed for acknowledgement that his merger plans had been put to rest.
To the public, it may have seemed an abrupt goodbye to the man who, over his six-plus year tenure, hauled Sprint away from the edge of disaster and then saw it slip back in that direction.
“You have to remember where Sprint was when Hesse took the helm,” Ken Hyers, director of Wireless Device Strategies at Strategy Analytics, told eWEEK. “Sprint was in substantial trouble. It was as though he was on a ship with multiple leaks, and the first few years he was just running around patching up leaks, just to keep things afloat. … He had a really unenviable job at the time, just to keep that company alive.”
Jan Dawson, chief analyst with Jackdaw Research, agreed.
“I don’t think it’s too strong to say that he really saved Sprint,” Dawson told eWEEK.
When Hesse was named CEO in 2007, it was with the hope that he could clean up the cultural and technological messes that had resulted from Sprint’s acquisition of Nextel, which had a network that was incompatible with Sprint’s. In addition to the realities of what turned out to be unrealistic ROI targets for the deal, its proposed “merger of equals” concept prevented the companies from ever working effectively as one.
(Dawson, cutting and pasting from a 2008 blog post he wrote after a meeting with the then-newly inaugurated Hesse, offers a nicely succinct rundown of the mess.)
In an Aug. 6 farewell letter, Hesse rattled through a list of his accomplishments, in an effort to congratulate the “teammates” who toiled alongside him—if not also to provide reminders to those unimpressed by his accomplishments.
“We’ve generated a whirlwind of action and innovation: Simply Everything, Ready Now, Any Mobile Anytime, ground-breaking environmental goals, Instinct, Reclaim, Pre, EVO 4G, iPhone (finally!), Satisfaction Guarantee, Boost Unlimited, acquiring Virgin Mobile and iPCS, successfully fighting AT&T’s acquisition of T-Mobile USA, shutting down iDEN, acquiring U.S. Cellular spectrum, the SoftBank merger, acquiring Clearwire, launching Spark, Framily, the M8 Harman Kardon edition with Spotify, the GS5 Sport with Under Armour, the Satisfaction Guarantee (reprise), and national HD Voice (to name just a few—whew!),” wrote Hesse.
Sprint Says Goodbye to CEO Hesse’s Steady Fortitude
He also included the 20 customer satisfaction awards from J.D. Power & Associates, Sprint’s climb “from worst-to-first” on the American Customer Satisfaction index, and its accomplishments in corporate responsibility and innovation, with Sprint being granted an average of more than two U.S. patents “every business day for the past two years.”
And Hesse also noted the challenges of ultimately having to combine three networks—Sprint’s mid-band Code Division Multiple Access (CDMA), Nextel’s low-band iDen and Clearwire’s high-band with WiMax.
“Combining these three disjointed networks into one was a can we couldn’t keep kicking down the road,” Hesse wrote, adding that after surviving a “near-death experience” in 2008, Sprint again had to “bite the bullet” and undertake a major rip-and-replace of its infrastructure.
“This has been an extraordinarily difficult transition, as call drops and blocks have increased and subscribers have declined,” he went on, adding that the worst is again behind Sprint and now is the “right time in Sprint’s evolution for Marcelo to take the reins.”
Hesse’s Steady Presence
From 2007 to 2014, Sprint had three clear objectives: fix the customer experience, establish a clear brand and focus on profitability.
“These huge objectives remained unchanged, and it was good for stabilizing the business and moving it forward,” said Dawson, who in his Aug. 6 blog post described Hesse, on his arrival at Sprint, as a “safe pair of hands.”
However, Dawson told eWEEK, “If the market changes and you stay the same, you start to fall behind. … The fact that Hesse had been there and been so consistent, started to work against Sprint.”
Hyers agreed that there were benefits to Hesse’s consistent presence and focus, and pointed out Hewlett-Packard, which went through several CEOs in quick succession, as having suffered the opposite.
“There’s a lot to be said for the same person following through on a vision,” said Hyers.
Roger Kay, principal analyst with Endpoint Technologies, is less impressed.
“He was likeable and affable and he looked the part … but he just didn’t deliver the goods in the end,” said Kay. “It’s kind of surprising how long it took the board to catch on.”
Kay added that telecom is still a “pretty old school” industry, meaning that Hesse will walk away with a considerable severance package.
“His severance is like $40 million, and he got like $100 million in stock … for essentially destroying shareholder value,” said Kay.
A portion of Sprint’s troubles came from its decision to back WiMax. Shortly afterward, Hesse acknowledged he knew WiMax wouldn’t be the winning flavor of 4G, but said it was worth pursuing at the time to provide Sprint with the claim that it was first to 4G.
Kay, musing that he wouldn’t be surprised if Intel had sweet-talked Sprint into backing WiMax, concluded, “Basically, he bet on the wrong horse. And you could say that everybody makes mistakes, but at his pay rate, you can’t make mistakes like that.”
Sprint’s New CEO
Jackdaw’s Dawson points out three personality types in the industry. T-Mobile’s Legere is brash and speaks his mind, and then there’s AT&T’s Ralph de la Vega, who “operates within the talking points and only says the things that have been approved by his handlers and lawyers.”
Sprint Says Goodbye to CEO Hesse’s Steady Fortitude
“Hesse was a nice in between,” said Dawson. “As a human being, he’s a great guy, and he was one of the most approachable, human CEOs out there. … You felt that he was being very nice and open and charming … and he would actually tell you what he thought, not just give you the talking points.”
The 43-year-old Claure, it seems, has a bigger personality, more in line with the very driven and outgoing Son.
In its introduction of Claure, Sprint said that its new CEO had built Brightstar into a $10.5 billion business, was a selected as a Young Global Leader by the World Economic Forum, and had several times received Entrepreneur of the Year and CEO of the Year awards.
In his letter, Hesse described Claure and Son as having “an exceptional relationship,” and said that Claure could “get the most benefit from [Sprint’s] relationship with Softbank.” (Softbank owns a 78 percent share of Sprint.)
But of course, there’s only room in the industry for one Legere-style personality, said Hyers.
“Sprint needs to play the straight man [to T-Mobile] and make the point that, we can offer the same quality, and we don’t have to play blue to do it,” Hyers said with a chuckle. “It needs to be edgier than AT&T and Verizon, which obviously aren’t edgy in the first place. And T-Mobile appeals to a young demographic, which Sprint needs to go after, but in a little more mature way.”
What else does Claure need to do?
“Basically, the last year at Sprint has been about acquiring Clearwire, fending off Dish, rushing the switch to LTE and making the T-Mobile deal happen. All of these things have taken considerable management attention,” said Hyers.
“Now, they need to focus on the LTE build-out, network coverage, and really growing the business organically,” Hyers continued. “They need to focus on the day-to-day business of running a wireless network.”