Update: Sprint chief Forsee resigns

New leadership needed 'to move the company forward'

Gary Forsee has resigned as chairman, president and CEO of Sprint Nextel Corp., effective immediately, the company said Monday.

A committee of Sprint's board of directors is searching for a new CEO. Board member James Hance Jr. will become acting nonexecutive chairman and Paul Saleh, chief financial officer, will serve as acting CEO until Forsee's replacement is named.

Sprint decided it was time to put new leadership in place "to move the company forward in improving its performance and realizing corporate objectives," according to a statement attributed to board member Irvine Hockaday. The board will focus on chief executive candidates outside the company, he said.

Also Monday, Sprint said it expects to report a net loss of 337,000 postpaid subscribers in the third quarter as well as revenue and income measures below its earlier forecast. It expects consolidated operating revenue to fall below the forecast of $41 billion to $42 billion and adjusted operating income before depreciation and amortization to come in below the previous guidance of $11 billion to $11.5 billion.

Sprint, the third largest U.S. mobile operator with about 46 million customers, has been struggling against two much larger competitors, AT&T Inc. and Verizon Wireless. It was formed from the merger of Sprint and Nextel in 2005 and has been criticized for slow progress in merging the two companies' different network technologies. Last year it committed itself to a multibillion-dollar buildout of a WiMax wireless data network that has been scheduled for a widespread launch next year.

Forsee has been under fire over the past several months as Sprint's financial performance and subscriber numbers sagged and its stock fell. He joined Sprint in 2003, and has been president and CEO of Sprint Nextel since the merger, and was named chairman last year.

A key task for the company's next chief will be to figure out how to migrate users of the former Nextel network, based on iDEN technology, to Sprint's Code Division Multiple Access infrastructure, said Forrester Research Inc. analyst Charles Golvin. The incoming executive will also probably take a hard look at Sprint's planned capital investment in WiMax as its finances falter. One result might be a slower rollout of the closely watched next-generation network, he said. Sprint wants the network to reach 100 million people by the end of 2008, but its radio licenses don't require it to roll it out that fast, Golvin said.

Forsee's departure is good for the company, said Tad Neeley, a principal at Gemini Partners Inc. and a private equity investor in a mobile virtual network operator (MVNO).

"Sprint now needs to focus on developing its strategic plan and figuring out, really, what it wants to be," Neeley said. "Gary Forsee wasn't really providing that kind of leadership." Although it has valuable assets, such as a good [third-generation] mobile data network and the spectrum it's using for WiMax, Sprint hasn't made the most of the Nextel acquisition, he said.

The company might look at moves as big as selling off its enterprise wireline telecommunications business or focusing on wireless services strictly for businesses, Neeley said. Meanwhile, it should decide whether to fully commit itself to its wholesale mobile business serving MVNOs, about which it has been sending mixed signals, he added.

Copyright © 2007 IDG Communications, Inc.

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