Sprint’s chief executive, Marcelo Claure, announced that he will replace Sprint’s CFO with Michel Combes, the former head of French cable company Altice. At Sprint, Combes will be in charge of “leading the company’s financial operations, strategy and continued cost transformation.”
Interestingly, the move comes a few days after Wall Street research firm BTIG lowered its estimates on Sprint, largely due to what it considered unattainable targets laid out by Sprint’s outgoing CFO Tarek Robbiati.
In Claure’s announcement this morning, Claure offered praise for Robbiati’s work: "Tarek’s contributions to Sprint have been invaluable including his leadership to drive operating cost reductions and execute innovative financial transactions to fund our turnaround and significantly reduce the company’s cost of capital," Claure said in a release.
Combes will assume the CFO role on Saturday, while Robbiati will stay at Sprint until Jan. 31 “after a seamless transition of responsibilities.”
"Michel is an extremely capable and accomplished global telecom and cable industry leader and I know bringing him on board will help to accelerate our progress as Sprint begins the next chapter of our transformation," Claure said in a release.
It’s a new year & a new phase in @Sprint’s transformation. Now is the time to further bolster our talent. Michel Combes, an accomplished leader in telecom & cable, will be joining my team as President & CFO. Can’t wait to welcome him to #KC. $S https://t.co/rlrwwkv0Eu pic.twitter.com/zDi6z2P1jz— MarceloClaure (@marceloclaure) January 4, 2018
Combes most recently worked at Altice after founder Patrick Drahi in 2016 moved him into the chief executive position following the close of Altice’s acquisition of Cablevision. But Drahi took the reins back from Combes after less than a year in an attempt to reassure skittish investors.
Claure’s selection of Combes—who was also CEO of Alcatel-Lucent during the company’s sale to Nokia—is noteworthy considering Sprint inked a major MVNO agreement with Altice in November. Altice—today the nation’s fourth-largest cable company after purchasing Cablevision and Suddenlink—will use Sprint’s network to power a forthcoming Altice-branded wireless service, while Sprint said it will leverage Altice’s wired network to connect its small cells and cell towers.
The replacement of Robbiati comes just days after BTIG analyst Walter Piecyk offered Sprint estimates that ran counter to many laid out by Sprint’s CFO.
“Robbiati has stated that he expects Sprint to return to revenue growth in 2018, but we think that milestone may be out of the company’s reach this year,” Piecyk wrote. “The difference in our expectations in 2018 relative to the company are likely driven by their expectation of growth in phone gross additions compared to our estimate of <1%. We estimate that post-paid phone gross adds would have to grow by 17.5% in 2018, (compared to the 4.7% growth in 2017) in order to return the company to service revenue growth by Q4. That might be challenging given the company’s plans to increase price and the diminishing marginal impact of steeper and steeper price cuts.”
Sprint's shares fell sharply this morning on the news of Robbiati's departure. "Unfortunately, we believe this feeds the narrative of concern that S needs to spend on network and continue to aggressively cut costs," wrote Wells Fargo analyst Jennifer Fritzsche in a note to investors this morning immediately following Sprint's announcement. "We believe Robbiati did a very impressive job as to what he was tasked to do -lower the company's cost of capital. However, at this point in Sprint's evolution we believe Combes' turnaround expertise will be well served. Key questions for us with this new role - what is Combes' view on financing (and funding of S's capx initiatives) and continued ability to cut costs."
Robbiati’s departure follows the collapse of merger negotiations between Sprint and T-Mobile, as well as a promise by SoftBank’s chief executive to raise Sprint’s network capex from a low of around $2 billion per year to a high of up to $6 billion per year.
Robbiati's ouster also comes just weeks after Claure announced a range of organizational changes to Sprint’s management, actions that include reducing the number of his direct reports, redesigning the company’s offices, promoting some executives and letting others go. Those changes included the departure of top Sprint executives including Günther Ottendorfer, Jeff Nelson and Jim Hyde.