Sprint Changes CEOs, Puts Focus on Growing Company
Dan Hesse Is Out, Entrepreneur Marcelo Claure Is In as Carrier Drops T-Mobile Bid
Sprint Corp. S -16.62% on Wednesday replaced Chief Executive Dan Hesse with billionaire entrepreneur Marcelo Claure, and said its focus is on building the business.
"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," said Sprint Chairman Masayoshi Son.
The comments suggest the wireless carrier is prepared to go it alone. According to people familiar with the matter, the company decided Tuesday to end its pursuit of T-Mobile US Inc. TMUS -8.05% in the face of stiff opposition from regulators.
Instead, Sprint will have to try to bulk up the hard way—by launching a fierce fight to rebuild its subscriber rolls after shedding customers for years.
The man charged with leading the improvement, Mr. Claure, will start Monday. He will receive a base salary of $1.5 million and a $500,000 signing bonus, and will be eligible for bonuses that could at least triple his salary.
A Bolivian soccer fan, the 43-year-old Mr. Claure built mobile phone distributor Brightstar Corp. into a company with more than $10 billion in revenue and a presence in more than 50 countries. SoftBank Corp. 9984.TO -3.50% , which also has a commanding stake in Sprint, bought control of Brightstar in January to give it more clout with makers of mobile phones and put Mr. Claure on Sprint's board.
Mr. Claure will have his work cut out for him. An extensive network overhaul has hurt service quality and made it difficult for the country's third-largest wireless carrier to recruit customers aggressively. But much of that work is now done, and Sprint said last week that it is testing new price plans in preparation for a strong push later this year.
Whether it can succeed is an open question. The company has lost money every year back to 2007, the fallout of a disastrous merger with Nextel that left it saddled with disparate network technologies and poor customer service. The company was taken over more than a year ago by SoftBank, but the Japanese company's chief executive, Mr. Son, has struggled to change Sprint's culture.
Meanwhile, it will face an invigorated competitor in T-Mobile. Sprint's erstwhile merger partner has added more than 4 million of the industry's lucrative postpaid customers over the past five quarters and may attract new suitors. Iliad SA, which disrupted the French market with ultra cheap wireless plans, has offered to pay $15 billion for control of the company, and satellite television operator Dish Network Corp.'s chairman, Charlie Ergen has said he would be interested in T-Mobile if Sprint's deal fell through.
Sprint's shares fell 19% in morning trading, while T-Mobile dropped more than 9%.
The decision to abandon the deal at least will spare Sprint what was shaping up to be a long, distracting and potentially fruitless antitrust battle. The carriers had been working on a deal for months. But regulators had been working hard as well to head off further consolidation of the already highly concentrated U.S. wireless industry.
Their concern: A deal to combine the country's third- and fourth-largest wireless carriers would have left consumers with fewer choices for service, particularly at the low end of the market.
When Messrs. Son and Hesse met officials at the Justice Department and Federal Communications Commission over the winter, they were given the signal that a deal would face high hurdles. Last week, the FCC punctuated its opposition by saying it would propose rules that would prevent Sprint and T-Mobile from bidding together in a crucial coming spectrum auction.
Mr. Son, who had been driving the effort, worked hard to press his case. He appeared on Charlie Rose and at conferences promising an alternative to what he considers America's backward wireless networks and saying he needed scale to mount a real fight with Verizon and AT&T.
He also amassed a deep bench of advisers in Washington, including lobbyist David Carmen, former senator Bob Kerrey, and Tony Podesta, a lobbyist whose brother John is a senior counselor to President Obama.
Yet Mr. Son came to the decision over the past few weeks that moving forward with the bid was too risky, people familiar said. A deal would need to clear not only an antitrust review at the Justice Department, but also a public interest vetting by the FCC. Three years ago, it was opposition from the FCC that put the nail in the coffin of AT&T's $39 billion deal to buy T-Mobile.
Jonathan Chaplin, an analyst at New Street Research, said Sprint's decision was "a step in the right direction," and the companies could revisit a tie-up when the regulatory environment was less hostile. Dropping the bid now would allow Sprint to finish turning itself around and avoid nearly two years of uncertainty.
The decision to bow to government pressure is the latest development in what has been a wild year for media and telecom, including Comcast Corp.'s planned $45 billion acquisition of Time Warner Cable TWC -0.67% and AT&T's $49 billion deal for DirecTV. DTV -0.40% It comes on a day when 21st Century Fox abandoned its effort to buy Time Warner Inc. for about $80 billion and will surely disappoint the scores of bankers and lawyers representing the multiple parties with stakes in the deal.
Since buying control of Sprint, Mr. Son has found it more difficult than he anticipated to change the stodgy culture of a telecom company based in Overland Park, Kan., that he said had a "loser" mentality. Mr. Son opened an office in San Carlos, Calif., and brought SoftBank engineers from Japan to help guide the turnaround.
His brash personality rubbed some Sprint executives the wrong way, however, and there has been a series of departures in the sales, marketing and network departments.
"Masa and I are very different and we don't always agree," wrote Mr. Hesse in an email to the Journal earlier this year, using Mr. Son's nickname. "But we respect each other a great deal and we communicate that respect to one another regularly."
—Gillian Tan and Thomas Gryta contributed to this article.