Sprint CEO aims for winning strategy

Dan Hesse, Sprint Nextel's s new CEO, is preparing for war.

His arsenal is packed with "nukes" — Hesse-speak for anything that has the potential to disrupt the status quo in wireless. One possibility under consideration: flat-rate pricing for unlimited voice calls.

Such a plan, if offered, could shake up the U.S. wireless industry, which has long offered "buckets" of minutes for a set price.

Hesse says he's made no final decision about unlimited calling, but he also makes it clear that he's going to do what it takes to differentiate Sprint from AT&T t and Verizon Wireless vz. His goal: drive customer sales through the roof.

"If we can't be different, we can't win," he says flatly.

For Sprint, "winning" is a relative term. After a string of dismal quarters, Wall Street would be happy if Hesse could just stop Sprint's bleeding. In the fourth quarter, historically the strongest for cellphone carriers, Sprint lost more than 800,000 customers. Sprint currently has about 54 million customers, putting it in the No. 3 spot behind AT&T (70 million) and Verizon (66 million).

AT&T and Verizon, meantime, continue to add more than 2 million new customers each quarter. Many are coming from Sprint's customer base, which is dwindling along with investor confidence.

Sprint's troubles were in full bloom long before Hesse arrived on Dec. 18. After Sprint acquired Nextel, the combined company struggled with operational problems. As problems escalated, Sprint's share price plunged. Shares are down more than 60% since the $35 billion merger closed in August 2005.

The former CEO, Gary Forsee, was shown the door last fall. It remains to be seen if Hesse will fare any better.

John Hodulik, a telecom analyst for UBS, says it will take a lot of hard work to turn Sprint around. One of the biggest challenges: persuading a wary public to come back to Sprint, whose image and brand have been battered over the past year.

"They have to give people a reason to pick Sprint … and stay with them," Hodulik says.

Incremental steps won't stop the hemorrhaging, Hodulik says. "They need to make some fairly drastic changes." Jan Dawson, a telecom analyst at Ovum, agrees. "Sprint can be saved, but they're going to have to be pretty aggressive about the steps they take to fix it."

You'll get no argument from Hesse. Shortly after taking the helm, he set up a war room in an adjoining office. White boards were installed along with blackout shades, allowing Hesse to freely jot down his thoughts but still keep them secret, if necessary. Hesse has the only electronic key to the room, which is off-limits to everybody — including the cleaning crew — unless Hesse is present.

Giving a reporter a rare tour, Hesse draws back the curtains far enough to reveal a few category headers: "Nukes," "Strategy" and "People" are among them.

Fallout from the brainstorming bunker is coming quickly. Hesse recently announced plans to slash 4,000 jobs and shut hundreds of underperforming retail outlets and other distribution points. Hesse also removed three top executives, including the former chief financial officer, Paul Saleh, who until recently was acting CEO.

Hesse says he'll do what it takes to protect and promote Sprint's unique assets, even if it means upsetting the status quo.

"We're looking at all sorts of things that could be disruptive to the (wireless) industry," he says matter-of-factly. Plus, he says, "I like to be on the offensive rather than the defensive."

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