Sprint update offers fresh look at CEO Marcelo Claure’s shake-up

Marcelo Claure’s first three months as the new CEO of Sprint Corp. have been a whirlwind of price cuts, strategy changes and layoffs. On Monday, he has a chance to open the curtains wider and show the results.

For the first time, Claure, who replaced longtime CEO Dan Hesse on Aug. 11, will lead Sprint’s quarterly presentation of subscriber trends, financial results and business tactics.

It comes roughly two years after Tokyo-based SoftBank Corp. bought control of Sprint, and Hesse and SoftBank embarked on a campaign to buy smaller rival T-Mobile.

Those plans died this summer, and Claure, a billionaire Miami businessman who owns a Bolivian soccer team, was handed the reins of one of the Kansas City area’s largest employers. SoftBank also has lent its network chief, Junichi Miyakawa, to lead Sprint’s network and technology efforts.

So far, Claure has stayed mostly out of the public eye. But on Monday, a third quarter conference call with analysts will allow them to quiz the new CEO, and anyone can listen in.

“This is his stepping out,” said Jan Dawson, an industry analyst at Jackdaw Research in Utah. “We’ll learn a lot about his personal style and how it differs from Dan Hesse’s.”

Hesse generally came across as knowledgeable, relaxed and amiable as he worked nearly seven years to repair damage that he said had nearly sunk the company.

Claure seemed at ease in a more controlled session during a New York investor conference in mid-September. He also made it clear that big changes were coming.

Key among them will be the personal stamp of the CEO himself, how he goes about tackling one of the toughest jobs in the telecommunications business.

“That dictates the culture of the company a lot,” said Kate Pearce, senior strategist at Compass Intelligence.

Analysts generally expect Monday’s report on the company’s third quarter to show Sprint continued to lose subscribers through September, even as the three other national carriers already have said they collectively added almost 6 million new customers in the quarter.

Sprint also will report whether it was able to repeat the rare though small profit it posted in the second quarter when it earned $23 million on $8.8 billion in revenues.

Paul de Sa, with Bernstein Research, said he expects Claure to provide more details about his cost-cutting plans, Sprint’s progress toward gaining subscribers and about cultural changes. And he’d like to hear more about Claure’s plans, but “it may be too soon,” de Sa said in an email.

It also will be up to Claure, who has moved his family to the Kansas City area, to deal with other questions circling the wireless carrier.

Will Sprint reverse its customer losses before fast-growing T-Mobile passes it, as T-Mobile CEO John Legere has said would happen by year end?

How many jobs will Sprint cut from a workforce that already has fallen by 5,000 this year? And will Sprint turn to other companies — perhaps overseas — or to SoftBank to handle the work its departing employees did?

Sprint officials declined to comment ahead of the earnings report.

Job losses

So far, Sprint has revealed 452 job cuts at its Overland Park headquarters in October, along with a warning that more would come. It reported 235 job cuts in Reston, Va., as well.

Even before the cuts, Sprint’s total employment had tumbled from 38,000 at the start of January to 33,000 in mid-September. Part of that came from closing customer call centers and retail stores, though these accounted for only about 2,050 jobs. The total decline takes in retirements, departures to other companies and even hiring.

Sprint’s layoffs are the topic least likely to get an update Monday.

Companies understandably are reluctant to raise the subject, and Wall Street analysts rarely ask about it. This time might be different as analysts recognize the job cuts as part of a widespread spending review that Claure has made a priority.

Analyst Mike McCormack at Jefferies LLC said in a research note last week that Sprint seems certain to cut at least 2,000 employees based on severance pay charges reported already.

At the same time, McCormack expects the total to be larger. He estimated payroll savings of $375 million a year based on reducing employment by 3,000.

Sprint has said it doesn’t have a total number of layoffs because it continues to evaluate where it needs to cut.

The company’s payroll has been shrinking for years. Its biggest reported layoff came in 2009 amid the Great Recession and financial crisis. Hesse announced plans that January to cut 8,000 jobs “to weather this economic storm.”

Subscriber numbers

Claure has made boosting Sprint’s customer count his first priority, though he has had little time to influence the numbers that will be reported Monday.

This will be the first time that Sprint reports last among the national wireless competitors, and it is likely to lag them in other ways.

Verizon, AT&T and T-Mobile already have reported subscriber gains in the recently ended quarter — more than 5.8 million new subscribers among them.

“With so much of the industry having reported solid subscriber gains,” analyst Greg Miller wrote in a note to clients of Canaccord Genuity, “it is difficult to see how Sprint will be capable of halting the erosion of its customer base.”

T-Mobile claimed the quarter’s biggest gains and says it has added 10 million new customers in the last 18 months. The company also boosted its forecast of subscriber gains for all of 2014 to between 4.3 million and 4.7 million, a total many analysts said was likely low.

“T-Mobile continues to trounce each and every one of its competitors,” analyst Craig Moffett of MoffettNathanson Research wrote last week.

With 52.9 million subscribers at the end of September, T-Mobile may be only one good quarter’s growth away from catching Sprint, which had 54.55 million at the end of June. Both lag AT&T’s 118.6 million and Verizon’s more than 106.2 million, a total that includes only its retail wireless subscribers.

Claure has gone after phone customers by scrapping Sprint’s unusual Framily plan in favor of simpler ones. Sprint now mimics shared data plans at Verizon and AT&T but promises twice the data usage. It seeks to undercut T-Mobile on price for unlimited data plans that target individuals.

There is some evidence that Sprint’s new plans are attracting customers. T-Mobile said, for example, that its customer gains at Sprint’s expense were slower during October than in the third quarter.

Some analysts are saying Sprint may report a net gain in customers during the last three months of the year, which is a typically busy season for wireless companies.

Financial results

Sprint’s push for customers and pinch on budgets collide on its financial statement.

The small second-quarter profit this summer reflected a lot of work to ferret out savings, an effort chief financial officer Joe Euteneuer has highlighted during previous calls with analysts.

“Sprint has been doing a great job cutting costs and becoming more profitable, becoming a more efficient company,” analyst Pearce said.

At the same time, Claure’s campaign to win subscribers costs money.

New service offerings include some price cuts that will lower revenues. And double-data deals mean Sprint loses the chance to charge more as customers use increasing amounts of data with their smartphones.

Analyst McCormack also expects Sprint’s marketing expenses to climb in the effort to win customers.

Sprint also needs money to fund the iPhones it offers customers under a new promotion of iPhones for Life.

The update Monday will carry the added cost of $160 million in severance and other expenses tied to layoffs that have stretched throughout October.

This story was originally published November 2, 2014 at 7:11 PM with the headline "Sprint update offers fresh look at CEO Marcelo Claure’s shake-up."