Sprint shake-up might be in the works

Speculation last week that longtime Sprint Chairman and CEO William Esrey is about to step down had industry watchers looking back at his career while raising concerns about the company’s future.

Speculation last week that longtime Sprint Chairman and CEO William Esrey is about to step down had industry watchers looking back at his career while raising concerns about the company’s future.

“This is not the best time for Sprint to be dealing with a management shift,” says Lisa Pierce, an analyst at Giga Information Group. “This is a time when Sprint could be playing up stability at the executive level, which is a unique position [compared with other carriers].”

Sprint declined to comment but is expected by industry watchers to announce Esrey’s plans along with its 2002 year-end financial results Wednesday. Esrey, 63, was diagnosed with cancer of the lymphatic system in November.

Analysts have low expectations for Wednesday’s financial news given Sprint’s painfully slow revenue growth in recent quarters (it only crept up from $6.6 billion in the third quarter of 2001 to $6.8 billion in the third quarter last year) and generally poor results across the telecom industry. Sprint, like other carriers, has been hard hit by eroding margins in consumer voice and stagnant business service growth. Recently, Verizon surpassed Sprint as the nation’s No. 3 long-haul carrier.

Although Esrey might not be leaving Sprint at the best of times, observers say the company and industry owe him much.

“He has every right to be proud of his and his team’s accomplishments over the past 18 years,” Pierce says.

Esrey was elected the company’s CEO in 1985, one year before Sprint – then called United Telecommunications – launched its first long-distance service. Previously, the carrier largely provided local service in rural areas.

Today, Sprint offers local, long-distance and international services. Its digital wireless network, which spans 4,000 cities and supports 16.7 million subscribers, is among the industry’s largest.

Among Sprint’s boldest moves was its attempt to merge with WorldCom in 1999, a deal that regulators shot down because of competitive concerns. Since then, Sprint’s name has surfaced in connection with many merger rumors, including with assorted regional Bell operating companies, most often BellSouth.

“It was clear that Sprint was really trying to push that deal through. When it fell apart it was a real slap in the face,” says Johna Till Johnson, president and chief researcher at Nemertes Research and a Network World columnist.

In hindsight, Sprint dodged a bullet.

“[Sprint has] always had its values in the right place,” Johnson says.

Esrey has been outspoken about the damage WorldCom has done to the telecom industry.

“At Sprint, we kept asking ourselves what we were doing wrong because we couldn’t generate the numbers WorldCom claimed,” Esrey said in a speech in October.

“To compete, other carriers were forced to drop prices to nearly unsustainable levels. As we’ve discovered, the margins were a work of fiction, but the destructive effect on our industry was very real,” he added.

Esrey’s right-hand man, COO Ronald LeMay, is also said to be leaving Sprint, possibly opening the door for BellSouth executive Gary Forsee to take over.