New Sprint CEO promises bold moves starting Monday

The soon-to-be chief executive of Sprint Corp., Marcelo Claure, promised bold change when he starts Monday — but at least he’ll come here to do it.

In his first public remarks since being named hours earlier Wednesday to succeed longtime CEO Dan Hesse, the Florida cellphone billionaire staked his claim on Sprint’s future.

Claure’s remarks came as Sprint quietly dropped its hoped-for merger with T-Mobile US Inc., which Sprint wanted as a way to compete with giants Verizon and AT&T. Claure never mentioned the death of the merger, but he appeared ready for Sprint to go it alone.

The 43-year-old, Bolivian-born soccer team owner, whose Miami business made him a fortune, promised to further boost Sprint’s network, bring aboard new customers and pinch pennies along the way.

“You’re going to see us act very decisively,” Claure said during a brief shareholders meeting broadcast online Wednesday afternoon. “We’re going to look at costs extensively.”

Sprint’s announcement said Claure “plans to relocate to the Kansas City area” and “will be based at Sprint headquarters in Overland Park.”

The statement offered a sigh of relief for a community that had been bracing for a full-blown merger with T-Mobile. Two companies combining as one would have shed many duplicate jobs through layoffs, far more than a cost-cutting campaign at Sprint by Claure is likely to produce. A merger with T-Mobile also could have led to the moving of one of Kansas City’s most notable corporate headquarters.

“Sprint is our hometown company and contributes more than $8 million to philanthropic causes every year while employing 7,500 people locally. I’m confident under the new leadership of Marcelo, Sprint will continue to be a pillar in the Kansas City corporate and community landscape,” said Peter deSilva, president of UMB Financial Corp. in Kansas City.

Hesse, 60, also spoke briefly during the shareholder event but offered a long farewell to employees in an email Wednesday morning: “I will always be a Sprinter and cheering you on.”

The changing of the guard comes hand-in-hand with the decision to set aside months of deal making in secret and sales pitches in Washington for the T-Mobile merger. Ultimately, the leadership agreed with many outsiders that regulators weren’t going to let the nation’s No. 3 and No. 4 carriers combine.

Claure’s business credentials suggest he’s up to the task of winning customers while making a profit, something Sprint has been unable to do for the last seven years.

He founded Brightstar Corp. in 1997 and built it into a $10 billion-a-year operation. Last year, he sold control of the Miami-based company for $1.26 billion but kept his job.

The buyer was SoftBank Corp., which had spent $21.6 billion buying control of Sprint just a few months earlier.

Claure’s background stands in sharp contrast to Hesse’s. As an entrepreneur, Claure can claim to be self-made, and a billionaire. His business is international in scope, and his Latin American roots give him that added dimension as well.

Hesse was a long-time employee at AT&T, at one point running its wireless business, but an employee all the same. His foray into business building involved a Seattle-area company called Terabeam that pursued new technology about a decade ago. Partly backed by Son’s SoftBank, it didn’t succeed.

Hesse exits Sprint with a considerable bankroll, according to calculations by Bloomberg News. His severance pay may exceed $40 million in cash, stock and benefits, it said.

SoftBank founder Masayoshi Son, now also Sprint’s chairman, made the decision to move the head of his newly acquired successful cellphone supplier business to run his newly acquired struggling cellphone service provider.

“Masa Son is looking for an entrepreneurial winning spirit, and Marcelo certainly has that,” said Roger Entner, founder of Recon Analytics.

Brightstar handles cellphone inventories and deliveries for wireless companies around the globe. It’s a low-profit business that has to watch costs closely to succeed.

Claure’s promise to “focus on becoming extremely cost efficient” at Sprint may lead to significant changes, including some job cuts.

“In today’s environment you just can’t do it without head count reductions,” said Bill Ho, an industry analyst with 556 Ventures LLC.

Sprint has been cutting costs — recently closing some stores and customer call centers — but Claure offers the benefit of a fresh set of eyes on how and where money’s being spent.

Outsiders also expect Claure to populate Sprint’s next layer of executives with his own picks, though it’s unclear where changes may come. Expectations are that Claure has been actively involved in SoftBank’s dealings with Sprint, which named a new chief marketing officer and new chief network officer early this year.

For consumers, Claure probably means lower prices ahead. The company already has been testing different price plans in some markets, acknowledging that the marketplace has moved beyond its flagship Framily plan announced in January.

Price cuts will help Sprint reverse its loss of subscribers, which continued through June this year. Sprint still has more customers than T-Mobile, but its rival has been gaining, adding millions of subscribers over the last year.

Claure, during the shareholders meeting, promised to act decisively on the customer front while acknowledging that keeping costs down will be critical.

He offered a nod to gains Sprint has made on its network. The company spent billions to rip out old equipment and install the latest technologies. It’s essentially a platform through which the company now hopes to boost its slowest network speeds.

“We need to continue deploying the network,” Claure said. “The toughest part is behind us.”

Entner said Claure may have relatively little time to accomplish much of the work ahead of him. Sprint’s progress has been slow, perhaps too slow.

“There needs to be greater urgency,” Entner said. “That’s what they hired him for.”

Wall Street on Wednesday punished Sprint’s shares, mostly on its decision to stop chasing a merger with T-Mobile. The stock lost $1.38, or nearly 19 percent, to finish the day at $5.90. T-Mobile shares fell $2.85, an 8.4 percent drop, to $31.06.

Doubters argue that Sprint’s price cuts and network spending will leave it financially strapped. Craig Moffett, at MoffettNathanson Research, said in a note to clients that T-Mobile is the wireless company that’s in “the midst of genuine, sustained turnaround,” not Sprint.

Some analysts, however, saw Sprint’s shift in strategy as better than its disruptive pursuit of a merger.

“Sprint as a company is better off, as having already wasted almost a year circling T-Mobile it avoids spending another 6-9 months on continuing a quixotic strategy,” Paul de Sa wrote in a note to investment clients at Bernstein Research.

Jennifer Fritzsche, who covers the companies for Wells Fargo Securities, picked up the emotion of the day with the headline on her report to investors: “Lordy, Lordy … The Drama Continues.”

But she also see’s Sprint’s future as improving once this dust settles and it continues to improve its network.

Fritzsche said Claure’s background as a supplier of cellphones to the industry offers a competitive leg up for Sprint. At Brightstar, she wrote, “Claure knew quite intimately the buying habits and strategies of Sprint’s closest competitors” — AT&T, Verizon and T-Mobile.

Claure left his job at the head of Brightstar and agreed to sell his remaining stake in the company to SoftBank. The business sale and Claure’s plans to move here come in stark contrast to a sentiment expressed on Twitter just a few days ago.

“I have three passions; my family, my work at Brightstar and soccer,” said a tweet purporting to quote Claure. “If I can have all three in Miami it’s a great thing.”

While Claure didn’t post the quote, he retweeted it on July 31, providing his stamp of approval.

In a similar way, Claure’s official statement Wednesday left open a future pursuit of T-Mobile even as it closed the door on the current efforts.

The company never publicly acknowledged reports it had worked out the broad terms of a $32 billion deal with T-Mobile’s Germany-based parent company, Deutsche Telekom.

“While consolidating makes sense in the long term, for now, we will focus on growing and repositioning Sprint,” Claure said in the announcement.

It may mean Sprint will wait until after the 2016 national elections and hope a new administration in Washington will be more receptive to a merger.

This story was originally published August 6, 2014 at 6:57 PM with the headline "New Sprint CEO promises bold moves starting Monday."