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Wireless Week 2012 Leadership Awards: Over the past four years, the CEO has led Sprint from the brink. Now it’s time for Phase 2.

As you might recall, things weren't pretty when Dan Hesse took the helm at Sprint in late 2007. The operator's sales were in a slump, customers were leaving in droves and the company faced crippling write-downs from its merger with Nextel Communications in 2005.  

Six weeks after Hesse began, Sprint said it would have to write down nearly all the $31 billion goodwill value of its merger with Nextel. One month after that, Sprint announced disastrous financial results pegging its total losses for 2007 at a whopping $29.6 billion.  

Hesse had a mess on his hands. Calling the company's "deteriorating" business conditions "more difficult than what I had expected to encounter," Hesse warned investors that turning around the company would take time. 

Four years and several ups and downs later, Hesse's efforts to revive Sprint are starting to bear fruit.  

"I told you on my first call that our turnaround would be difficult and not quick," Hesse said during the company's fourth-quarter earnings call in February. "Although we're far from finished, our progress, nevertheless, has been very significant."  

Under Hesse's leadership, the company launched unlimited data plans, forged a WiMAX alliance with Clearwire, bought Virgin Mobile USA, got the all-important iPhone and began the laborious process of phasing out its iDEN network and moving toward LTE. 

Hesse’s reign also has been characterized by a number of out-of-the-box initiatives, such as signing up to be the launch partner for Google Wallet, outsourcing management of its network to Ericsson and embarking on a company-wide environmental push ranging from energy-efficient facilities to handset recycling.

Along with those initiatives came much-needed improvements in customer growth, sales and consumer perception of the Sprint brand. 

Sprint's net adds during the last three months of 2011 were its best in six years, its customer base reached an all-time high of 55 million and its postpaid net adds marked a 10th consecutive quarter of year-over-year improvement.  

"Our top line is growing again," Hesse said. "Our customer experience has gone from the worst to arguably the best in the industry, and our once battered brand is strengthening and gaining momentum." 

For Hesse, fresh off a regulatory victory from the failed AT&T/T-Mobile merger, 2011 capped the "first phase" of Sprint's recovery. As the company enters the second phase of its revival, there's still plenty of reason for caution. 

Sprint's gamble on the iPhone was a huge one for the cash-strapped company, totaling at least $15.5 billion. One research firm went as far as warning that Sprint could face bankruptcy if its bet on the iconic device goes sour. The operator also faces the complicated task of rolling out LTE in a narrow band of spectrum while refarming its 800 MHz holdings and coordinating with Clearwire on TD-LTE offload. In addition, it’s overhauling its infrastructure under its ambitious Network Vision project, which will replace legacy equipment with new, energy-efficient base stations.  

“The turnaround will hinge on their ability to grow revenue, as Network Vision is more about slowing growth in costs than cost reductions,” says BTIG Research analyst Walter Piecyk. “Revenue growth itself will likely rely heavily on ARPU expansion as the loss of iDEN will make it challenging for Sprint to grow its subscriber base over the next two years.

So if Sprint’s about-face is dependent on revenue growth, how is it doing? Company-wide annual sales grew 3 percent between 2011 and 2010, and postpaid ARPU for the Sprint brand grew $3.69 year-over-year during the fourth quarter as customers flocked to more lucrative smartphones.

That type of sales numbers are good news for a company that’s still on the way to recovery. But for Hesse’s comeback plan to succeed, those positive signs will need to continue. 


Making Progress: Sprint After Four Years with Dan Hesse

Sprint’s long-awaited rebound is showing signs of life.

Dan Hesse’s effort to get Sprint on the road to recovery has been hampered by its Nextel assets, which continued to drag on the company’s financial results for years after he became CEO.  Sprint showed signs that it was shaking off the worst effects of the merger in 2011, posting year-over-year improvements across several metrics. Though some areas still aren’t back to 2007 levels, the company’s trajectory appears positive. 

Full Year 2007

Customer experience rating: Last place, according to Consumer Reports 

Cash reserves: $2.246 billion

Total sales: $40.1 billion, a 2 percent drop from the previous year

Service revenues: $31 billion

Losses: $29.6 billion, stemming from a massive write-down on the Nextel merger

Customers: 53.95 million  - Added 773,000 net customers even as  iDEN users and prepaid customers fled to other providers

Postpaid churn: 2.2 percent

Postpaid ARPU: $59                                                                        

Adjusted operating income before depreciation and amortization (OIBDA): $10.8 billion, a 15 percent year-over-year decline

 

Full Year 2011

Customer experience rating: Ranked near the top by Consumer Reports, named the "most improved U.S. company" by the American Customer Satisfaction Index

Brand Strength: Best-ever measures of postpaid brand health, according to market research firm Ipsos

Cash reserves: $5.45 billion, helped along by $4 billion raised through debt offerings

Total sales: $33.68 million, an increase of 3 percent over 2010

Service revenues: $27 million, a rebound from $25.67 million the previous year

Losses: $2.9 billion, an improvement over the previous year's $3.46 billion loss

Customers: 55 million, up from 50 million in 2010 

Postpaid churn for the Sprint brand: 1.85 percent 

Postpaid ARPU for the Sprint brand: $59.76, up from $57.01 in 2010 

Adjusted operating income before depreciation and amortization (OIBDA): $5.07 billion, the first year-over-year improvement in pro forma performance in seven years 

 

 

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