How Sprint's next CEO can right the ship

Analysts discuss ways Sprint can boost marketing, network integration

By Brad Reed, Network World
October 10, 2007 02:50 PM ET

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Although Gary Forsee has stepped down from his posts as Sprint’s CEO, president and chairman, questions remain about what his successor must do to turn the company around.

Analysts say the company faces myriad problems, from continued difficulties in integrating former Nextel users into the Sprint network to subpar marketing campaigns to investor nervousness over the future of its $5 billion WiMAX investment to a shrinking subscriber base. In the quarter leading up to Forsee’s resignation, for instance, Sprint announced that it had lost 337,000 customers. And a recent report from UBS Investment showed that Sprint’s ARPU (average revenue per user) is falling at a rate of 5% per year, while AT&T and Verizon’s ARPU is growing at an annual clip of 3% to 4%. Sprint’s share price, meanwhile, has fallen by more than 20% since the company’s merger with Nextel in August 2005, and the company closed Wednesday trading at $18.02 per share.

The Sprint saga: a timeline
Sprint's ups and downs since the Nextel merger:

October 2007:	Sprint Nextel announces it lost 337,000 customers in Q3 2007. Gary Forsee steps down as Sprint chairman, president and CEO. Since Sprint merged with Nextel in 2005, SprintÕs stock price has dropped by more than 20%.
August 2007:	Sprint Nextel announces its WiMAX service, now known as Xohm, will launch in the Chicago and Washington/Baltimore markets by the end of 2007, and is planned to reach 100 million users nationwide by the end of 2008.
July 2007:	Clearwire and Sprint Nextel announce deal to build nationwide WiMAX network jointly, where Sprint agrees to build 65% of the network, and Clearwire will build the rest.
May 2007:	Sprint Nextel announces a loss of $211 million for Q1 2007, a significant drop from the $164 million profit it posted in Q1 2006. Also, the company announces an annual 10% growth in its subscriber rolls, lagging behind competitors AT&T Cingular (11.2%) and Verizon Wireless (14.5%).
March 2007:	U.S. General Services Administration awards Networx Universal contracts to AT&T, Verizon Business and Qwest Communications. Sprint Nextel is only bidder on the program not to receive a contract.
August 2006:	In an effort to get ahead of the curve on 4G devices, Sprint Nextel announces plans to roll out a nationwide WiMAX network. The company estimates it will spend a total of $3 billion building out the network in 2007 and 2008.
May 2006:	Sprint Nextel spins off its local division, now called Embarq.
August 2005:	Merger between Sprint and Nextel becomes official.
December 2004:	Sprint and Nextel agree to $36 million merger.

Click to see: Sprint Nextel timeline

But while the new Sprint CEO will face several challenges in any effort to turn the company around, some analysts believe Sprint is already close to regaining some of the market share that it’s lost since it merged with Nextel in 2005.

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“Sprint arguably has an equal, if not better, handset selection than Verizon, yet Verizon still attracts a lot more subscribers than Sprint does,” says Michael Nelson, an analyst for the Stanford Group. “But people choose Verizon because it’s been drilled into their head that they have a terrific network. What needs to be fixed has a lot to do with overall marketing and positioning.”