Troubled telecom Sprint Nextel Corp. said Wednesday it is combining its corporate headquarters in Reston, Va., with its operational command center in Overland Park, Kan. The move will reduce travel expenses, optimize its real estate and immerse senior management more fully in its operations. New CEO Dan Hesse has bigger problems to solve, however.
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In many ways, Sprint Nextel essentially operated as two carriers following the $35 billion merger that created the company in 2005 -- perhaps best exemplified by the two headquarters and the maintenance of two brands, Sprint and Nextel, with both remaining on separate networks and technologies. Following criticism for a lagging marketing transition, it did ultimately give up the two brands. Adding to post-merger troubles, network problems cost Sprint Nextel many of its most lucrative customers.
Hesse will have to set the carrier apart from larger rivals such as AT&T Inc.'s mobile arm and Verizon Wireless, the joint venture of Verizon Communications Inc. and Vodafone Group plc. One option is to invest in the company's WiMax wireless broadband service -- although the prospect of costly network construction to support a new technology upsets some of Sprint Nextel investors. Selling the WiMax business, finding new backers or joining the unit with Craig McCaw's Clearwire Corp. are also options. Hesse could also compete against the larger carriers by lowering its prices. Another option is to sell the company's long-distance unit.
As Hesse mulls the possibilities, the Sprint Nextel chief will have the input from a prominent critic of Sprint's former CEO, Gary Forsee. Sprint Nextel said Tuesday that it has appointed Ralph Whitworth of the San Diego firm Relational Investors LLC to its board, replacing William H. Swanson.
Jason Armstrong of Goldman, Sachs & Co. notes that Whitworth has a history of buying shares in underperforming companies and pressing for change. "With this backdrop, the most likely path at Sprint is monetizing noncore assets," Armstrong wrote in a Wednesday report, suggesting that WiMax and the long-distance business would be the "logical focus."
Sprint Nextel shares traded about 1% higher Wednesday afternoon, at around $10.10. When it completed the merger with Nextel in August 2005, Sprint closed above $26. - Chris Nolter
See press release about Sprint Nextel headquarters via Yahoo! Finance
See story about Whitworth from Dealscape
See Whitworth announcement from Sprint Nextel
See story about Forsee ouster from TheDeal.com
