Sprint’s CEO sees 2014 rebound after beating Apple shares

Lower Headcount

The transformation has hinged in part on slimming down the company. When Hesse took over in December 2007, Sprint had 60,000 employees. Today it has a third fewer, at about 40,000.

The diminished ranks are evident at its leafy headquarters, a $1 billion complex of brick and marble-columned buildings that looks like a college campus in July. Built during the late-1990s Internet boom to hold 14,500 employees, it houses 6,500.

A return to profitability in 2014 is no sure thing. Analysts predict that Sprint will be right around the break-even point that year, though they do see the company solidly in the black by 2015, according to data compiled by Bloomberg.

“There’s still a considerable amount of risk in Sprint since they are not quite halfway through the network migration,” Dinsdale said. “They are chronic in their disappointments.”

When Sprint acquired Nextel, it promised seamless “interoperability” between the two networks. Instead, the deal saddled Sprint with incompatible technology that forced Hesse to cut the losses and shut it down. Sprint ended up writing off about $30 billion, or 80 percent of the purchase price.

Retaining Users

Now Sprint has to coax those customers onto its main network. Initially the company had been converting about 25 percent of defecting Nextel customers into Sprint users. By last quarter, after focusing more intently on courting those subscribers, the company’s recapture rate rose to 60 percent.

Higher retention will help slow the loss of customers, though the company will continue to post user losses until the Nextel network is shut down next year, Hesse said. Sprint also may eventually drop “Nextel” from its corporate name, he said.

Then there’s Clearwire. Without enough money to build its own national fourth-generation network, Sprint contributed some of its airwaves to a joint venture with Clearwire in May 2008. Comcast Corp., Time Warner Cable Inc., Google Inc. and Intel Corp. also invested in the business, which planned to use WiMax technology to build a fast, national wireless service. The venture has yet to break even, and it stopped its WiMax expansion last year to focus instead on LTE.

Skepticism Remains

Next month will be the anniversary of Sprint’s stormy 2011 analysts’ day, when it refused to share information about the iPhone purchase agreement and the impact on finances. Sprint further irked investors by saying it would have to raise more money to fund its network-upgrade plan. The shares fell the most in three years, dropping 26 percent over a two-day period.

The company later agreed to share more data about the iPhone, and the Apple deal is now seen as a smart move. Sprint may look even smarter a year from now, when the LTE network is more complete and the full impact of the company’s deal with Apple is known, KDP’s Dinsdale said.

“It was a huge transaction -- it was transformational,” Dinsdale said. “But it needed to be done and they had the guts to do it.”

Bloomberg News

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