Industry veteran Dan Hesse named new Sprint CEO

Embarq head will also be on the board, but not as chairman

Sprint Nextel Corp. this morning appointed wireless industry veteran Daniel Hesse, 54, as its new CEO, effective immediately.

Hesse has been serving as CEO of Embarq Corp. since its inception in 2006, and prior to that he had been head of Sprint's local telecommunications division before that unit was spun off to create Embarq.

Hesse will also serve on the Sprint board of directors, according to a statement issued by the company today.

James Hance, nonexecutive chairman of Sprint, said that Hesse's mandate will be to "hone our strategy, improve our ability to serve our customers and execute in the marketplace. I am convinced that under Dan's leadership, we will deliver sustainable results and build shareholder value." Hance will remain as nonexecutive chairman of the board.

Chief Financial Officer Paul Saleh has been interim CEO at Sprint for the past two months since the resignation of Gary Forsee, who had been chairman, president and CEO. Forsee left after Sprint's subscriber numbers dipped and its stock fell, amid criticism by some that the company was not focusing on its conventional wireless business, while at the same time kicking off an ambitious WiMax high-speed wireless initiatve.

One longtime analyst of Sprint, Jeff Kagan, said that appointing Hesse is "great news for Sprint," adding that Hesse "may be the perfect choice."

Hesse had headed AT&T's wireless operation in the 1990s, creating a "strong and innovative company," Kagan said.

His performance heading up Embarq has also been impressive, Kagan said, noting that he took a quiet, "almost invisible part of Sprint" and made it into the fourth largest local telephone company after AT&T Inc., Verizon and Qwest Communications International Inc.

While Sprint has considered spinning off its Xohm WiMax initiative to a third party and then acquiring bandwidth for its own use, Kagan said that Hesse probably doesn't even know what Sprint should do about Xohm, as yet.

"Sprint is an excellent wireless carrier, and they have been trying to figure out how to grow outside of wireless," he said. "I think that Sprint should consider reacquiring Embarq and working on Xohm as a big potential new service during the next few years."

Jack Gold, an analyst at J. Gold Associates LLC in Northboro, Mass., said Hesse will need to take drastic steps in the next nine months. "[Hesse] has to win back some of the lost business and he has to focus on getting more Average Revenue Per User."

Gold said that to regain some lost momentum, Sprint should offer new plans, such as true unlimited service at a low price, better upgrades to handsets, and guaranteed customer service. As for Xohm, Gold said it represents the future for Sprint. "If they blow it [with Xohm], they are going to slowly fade away," Gold said. "Xohm provides a way for them to increase subscribers and revenues."

Hesse spent 23 years in all at AT&T, and was CEO of AT&T Wireless from 1997 to 2000.

He will be looking at all aspects of the Sprint business, including Xohm, but Sprint will not report on plans for Xohm and other initiatives until sometime early next year, a spokesman said.

Lisa Pierce, an analyst at Forrester Research Inc. in Cambridge, Mass., said that companies need Sprint's Wimax as much as consumers do. Enterprises need alternates to T1 connections, which are costly and prone to outages, she said. "WiMax has the potential to be that [alternative] vehicle, and can bring with it packets and minutes to enhance Sprint's top-line revenue."

She said Sprint should also focus on land-line capabilities for large business users. "Enterprises need alternatives to the effective duopoly of AT&T and Verizon Business, and would like Sprint to be a key enterprise service provider going forward. Rapid, substantial, sustainable commitment from Sprint and its new CEO is required in 2008 and beyond."

Copyright © 2007 IDG Communications, Inc.

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