CEO Profile: Sprint's new CEO showed grit from the start

OVERLAND PARK, Kan. -- Don't let the polite manners and Jimmy-Stewart-like earnestness fool you.

Dan Hesse, Sprint Nextel's s new CEO, has a steely core that belies his nice-guy image. Within weeks of arriving on Dec. 18, Hesse released three top executives, including the person who had been acting CEO. He also announced plans to cut 4,000 jobs and jettison underperforming stores and distribution outlets.

Hesse is characteristically low key — and plain-spoken — about his swift housecleaning. "Accountability is a big thing with me," he says simply.

Under the former CEO, Gary Forsee, Sprint began bleeding customers — more than 1 million in 2007. AT&T t and Verizon Wireless vz feasted on Sprint's misery, adding more than 2 million new subscribers apiece in the fourth quarter alone.

Forsee, who engineered the Sprint-Nextel merger in 2005, was shown the door in fall. Hesse, 54, was CEO of Embarq, a Sprint spinoff, when he was tapped to take over.

Pressure on Hesse ratcheted up last week when Verizon announced an all-you-can-eat wireless plan for $99.99 a month. It was a watershed moment for the U.S. wireless industry, which has historically sold big buckets of minutes for a set monthly price.

Within hours, AT&T and T-Mobile matched Verizon's offer. Sprint has yet to respond.

Hesse declines to offer any specifics, but he clearly sees an opening for Sprint. "Let's just say I'm glad they put their cards on the table," he says with dead calm.

Roger Entner, a senior vice president at IAG Research, thinks Sprint will counter with an unlimited plan that is slightly cheaper than what AT&T and Verizon are offering. He doesn't think Sprint can wait very long to respond.

Those who have worked closely with Hesse don't doubt he can deliver.

"Dan is a person who is prepared to take risks, but he's not a gunslinger," says Mackey McDonald, CEO of VF Corp. vfc, the world's largest apparel maker. Hesse joined the VF board nine years ago. "He's a very strategic thinker."

It remains to be seen if Hesse can restore Sprint's luster. Shares have lost more than half their value over the past year, reflecting Wall Street's frustration with the company's botched efforts to meld the Sprint and Nextel brands, cultures and operations.

Sprint committed another unpardonable sin: It surprised Wall Street by losing far more subscribers than expected — more than 800,000 in the fourth quarter alone. The news was announced a month after Hesse's arrival. Sprint shares plunged 25% that day.

Hesse says he was also caught off-guard. "The subscriber losses — that surprised even me."

At AT&T, learning to think big

Hesse's response was blunt. A week after the subscriber losses were announced, three top executives left: Paul Saleh, the former chief financial officer and acting CEO prior to Hesse's arrival; Tim Kelly, chief marketing officer; and Mark Angelino, president of sales and distribution.

Keith Cowan, Sprint's chief strategist, says Hesse's not-so-delicate message to the troops came across loud and clear. "A new sheriff is here," Cowan says. "People have concluded that 'I can either get behind this person or move on.' "

Hesse's eat-or-be-eaten management style got its start at AT&T in the late 1970s. The story of how he joined AT&T says a lot about Hesse's grit.

Back then, AT&T recruited only from Harvard and Wharton. Hesse was attending Cornell, so he didn't even rate a look.

Undeterred, Hesse asked his sister, who lived in Boston, to do him a favor: Go to the Harvard campus and get information about AT&T's summer internship program off the message board, used by recruiters to post opportunities. (This was pre-Internet, remember.) Hesse says he then sat down and wrote the AT&T recruiter a letter.

Hesse got the internship. Thus began his storied, 23-year run with AT&T.

His first stop, at 23, was in AT&T's new international division. Hesse, who circled the planet negotiating deals with foreign carriers, says the experience taught him a lot about the global telecom game.

A dozen jobs later, in 1996, Hesse was tapped to start a new AT&T-branded company that could compete head-on with AOL, then the king of dial-up.

Back then, AOL charged by the minute for access to its online content. Customers were largely limited to the "walled garden" of services offered exclusively by AOL — outside surfing was not encouraged.

Hesse had other plans. When AT&T's Worldnet made its debut in February 1996, it grabbed headlines with a novel offer: Unlimited access to the Internet for $20 a month. In addition, Worldnet customers could surf the Internet freely. The one catch? To get this deal, you had to subscribe to AT&T's long-distance services.

Worldnet sales went through the roof, Hesse recalls. "We added 600,000 customers in a matter of months."

With thousands of customers flocking to Worldnet, AOL and other rivals soon followed Hesse's lead.

Worldnet never did best AOL in the dial-up race. Even so, Hesse says, the company "really made the Internet legit." It also made flat-rate pricing a fixture in the Internet access business.

Restoring a great brand

A year later, in May 1997, Hesse got tapped to run AT&T Wireless, based in Seattle. The company was small — just 4 million customers — but even then, Hesse says, he could see that the opportunity was huge.

Back then, wireless calls were costly: $1 a minute or more, plus fees for long-distance and "roaming" from one carrier's territory to another. Adding to the confusion for customers, those fees could vary wildly depending where you were calling from, or to.

Because AT&T was a national brand, Hesse figured it only made sense to bring wireless into the fold. The result was Digital One Rate, which offered 600 minutes of anywhere calling for a flat fee of $90 a month.

Customers loved it and flocked to AT&T by the thousands. Rivals had no choice but to follow Hesse's lead. With that, wireless as a national service was born.

There's a footnote to this story: Digital One wound up attracting so many wireless customers so fast that some AT&T networks were overwhelmed. As customer complaints soared, the media pounced.

In reality, Hesse says, just one market — New York City — was affected.

Hesse says the New York problem was quickly fixed, and AT&T Wireless went on to win several J.D. Powers awards for service quality.

Even so, Hesse says, the experience taught him a valuable lesson: "You can restore a great brand when it's been tarnished, but you have to move quickly."

One example of a brand that rose from the ashes, he says, is Apple. "At one point, it was almost irrelevant," Hesse says. "Now look at it."

In that same vein, Hesse thinks the Sprint brand, considered one of the grand names in global telecom, is entirely salvageable.

As far as Hesse is concerned, Sprint isn't busted. It just needs a new game plan. And maybe a few well-placed "nukes" — Hesse-speak for anything that has the potential to rock the status quo.

"Anything that makes us relevant to the consumer is good," Hesse says, picking his words carefully. To get there, "We need to do something to make sure we're front-of-mind."

So stay tuned, America.