Report cites $25 million price tag on advice Sprint quickly dismissed

Budget slashing at Sprint Corp. left room for a $25 million network consulting fee for advice that was largely ignored, a report in The Wall Street Journal said.

The newspaper account, based on anonymous sources, described five months of work by telecom industry executive Sol Trujillo and others hired by Sprint chief executive Marcelo Claure. They recommended an elaborate revision of Sprint’s network strategy.

Sprint took exception with the article and some of its details, such as the $25 million price tag. The Overland Park-based company did not provide the correct amount.

“We don’t agree with the Wall Street Journal story in many ways,” Sprint spokesman Dave Tovar said Wednesday.

Trujillo’s work continued into this spring, a time during which Sprint cut $1.5 billion in expenses and eliminated about 3,700 jobs. Sprint executives are engaged in a second round of job and spending cuts with a $2.5 billion target.

Sprint’s work with the Trujillo group surfaced this spring in a report by telecom analyst David Dixon at FBR Capital Markets, according to a blog that posted Dixon’s report online.

According to the blog’s posting, Dixon said Claure was seeking approval for a $25 billion network plan.

The analyst also wrote that the Trujillo group was recommending an expensive “rip and replace” network alternative, similar to the extensive Network Vision effort undertaken by previous CEO Dan Hesse. Dixon said the Trujillo plan would be an “unfortunate misstep.”

Dixon also cited the Trujillo plan for Sprint as similar to one that Hong Kong-based CSL Limited had undertaken. Trujillo previously was head of CSL’s parent company, Australia-based Telstra.

Tovar declined to comment on Dixon’s report.

The network advice and plan that emerged, however, were rejected by Sprint chairman Masayoshi Son, the Journal said. Sprint is more than 80 percent owned by Tokyo-based SoftBank Group Corp., which Son founded and leads as its chief executive.

The Journal did not cite its sources other than to say they were familiar with the consulting agreement and resulting plan. It quoted Claure as saying that the effort was important because he had only “one shot at building this network” and that he wanted to “make sure we really got it right.”

Tovar said the $25 million price tag the Journal cited was incorrect, that the contract amount was less than that.

Tovar also said the contract was not out of the ordinary and was conducted in the normal course of business.

Trujillo, Tovar said, has an extensive track record in the telecommunications industry and had worked with Claure previously, points the Journal included in its story. Tovar complained, however, that the Journal seemed to portray the contract as presenting a conflict of some kind.

Trujillo’s group also looked at Sprint’s operations broadly, Tovar said, including not only the network but also customer care, sales strategy, marketing and talent acquisition.

Sprint adopted some of the recommendations from the Trujillo group but rejected others, Tovar said. He added that work by the group and others at Sprint raised important questions that ultimately led to the wireless carrier’s turnaround strategy that it is following now.

Some within Sprint told the Journal the fees were significantly higher than what other outside consultants had received. Others, also not named, told the Journal that the work hastened decision making on Sprint’s ultimate network plan and re-engaged Son in Sprint’s future.

Sprint settled for a network strategy that relies on adding cellular towers and installing small cell sites on buildings as a way to use its untapped wireless spectrum resources.

Son has said that he had lost confidence in his American acquisition but found faith in its new plans that he helped craft.

This story was originally published December 23, 2015 at 9:47 AM with the headline "Report cites $25 million price tag on advice Sprint quickly dismissed."