Sprint (NYSE: S) named Brightstar Corp. founder Marcelo Claure as its next CEO, replacing Dan Hesse, who has been at the helm of the nation's No. 3 carrier since December 2007. The switch comes amid reports that Sprint and its parent SoftBank have abandoned pursuit of a merger with T-Mobile US (NYSE:TMUS) after judging that they would face too much opposition from regulators.
Claure will take over on Aug. 11, Sprint said. The company said his "first priority will be to continue the build out of Sprint's network by leveraging its strong spectrum holdings as well as ensuring that Sprint always maintains truly competitive offers in the marketplace."
Claure, 43, founded Brightstar in 1997 and made it into a leading wireless device distributor. SoftBank agreed last fall to take a 57 percent stake in Brightstar Corp. for $1.26 billion, and Claure joined Sprint's board in January. Claure will resign from his position at Brightstar and SoftBank announced it would acquire Claure's remaining interest in the company.
"Marcelo is a successful entrepreneur who transformed a start-up into a global telecommunications company. He has the management experience, passion and drive to create the strongest network and offer the best products and services in the wireless industry," Sprint Chairman and SoftBank CEO Masayoshi Son said in a statement. "While we continue to believe industry consolidation will enhance competitiveness and benefit customers, our focus moving forward will be on making Sprint the most successful carrier."
The decision to abandon pursuit of a T-Mobile deal, after more than six months of feverish speculation, came at a Sprint board meeting Tuesday, according to the Wall Street Journal and the New York Times, which cited unnamed sources. The FCC and Department of Justice had made plain their desire to see four national wireless competitors remain.
"Four national wireless providers is good for American consumers," FCC Chairman Tom Wheeler said in a statement. "Sprint now has an opportunity to focus their efforts on robust competition."
Son had aggressively pursued a merger, and reports indicated he was working on a deal to acquire T-Mobile for $40 per share, valuing the carrier at $32 billion. Son argued that in order to take on Comcast (NASDAQ: CMCSA), AT&T (NYSE: T) and Verizon Communications (NYSE: VZ), Sprint and T-Mobile needed to combine to serve as a counterweight to the other companies and provide more competition through greater scale.
"We didn't think the opposition would be this strong," an unnamed SoftBank executive told Reuters, but added: "The environment will definitely change."
Now, Claure will face the daunting task of continuing Sprint's turnaround, which hinges on leveraging Sprint's 2.5 GHz spectrum for TD-LTE service to provide faster speeds and greater network capacity. Hesse also recently indicated Sprint is testing new rate plans and could cut prices at some point to become more competitive.
"While we expect investors to be disappointed if Sprint pulls out as a potential bidder for T - Mobile, the management shake-up could be seen as a positive," Credit Suisse analysts Joseph Mastrogiovanni and Michael Baresich wrote in a research note. "Under Hesse' s control, we have seen some improvement at Sprint, but results have generally fallen short of peers, including smaller rival T-Mobile."
According to a Sprint SEC filing, Claure will receive a base salary of $1.5 million per year and a wide range of performance-based incentives.
Hesse took over in late 2007 from Gary Forsee as Sprint was spiraling into oblivion as a company amid poor customer service and large customer losses as a result of its merger with Nextel, which has come to be regarded as one of the worst corporate mergers in history.
Since then, Hesse executed a number of deals, most notably last year to buy Clearwire for its 2.5 GHz spectrum and to secure the deal with SoftBank, which controls 80 percent of Sprint. Hesse shut down the Nextel iDEN network in mid-2013 and embarked on the carrier's multi-year Network Vision network modernization program, which took longer than expected but is largely complete. Hesse also turned around Sprint's woeful customer service--in 2014's American Customer Satisfaction Index, Sprint was named the most improved U.S. company in overall customer satisfaction, across all 43 industries, over the last six years.
Now, Sprint is moving forward with the next phase of its network deployment, called Sprint Spark, which features tri-band LTE service. Sprint expects Spark, which uses 800 MHz, 1900 MHz and 2.5 GHz spectrum, to cover 100 million POPs by the end of the year. Claure will now need to guide that process and help stop the bleeding in Sprint's subscriber base. The Sprint platform, which includes the carrier's CDMA and LTE networks and excludes customers it acquired from U.S. Cellular (NYSE:USM) and Clearwire, reported a net loss of 220,000 customers in the second quarter, including 181,000 postpaid losses. Sprint expects to return to postpaid subscriber growth in the fourth quarter.
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