Steamed investors put Sprint Nextel's CEO on hot seat

RESTON, Va. — Dan Hesse, Sprint Nextel's chief executive for less than five months, faced tough questions Tuesday about the company's continued trouble keeping wireless subscribers.

The nation's third-largest wireless provider lost about a million customers in 2007 and reported Monday it had lost 1.07 million more in the first quarter of 2008 alone.

"Over the last year, AT&T and Verizon have really been eating our lunch, particularly in terms of high-value customers," investor Carlos Roberts told Hesse at the annual shareholders meeting. Roberts asked Hesse what he was doing about it.

Hesse said Sprint Nextel is taking appropriate steps to regain momentum on subscriber numbers.

Hesse, a telecommunications veteran of nearly 30 years, was CEO at the original AT&T Wireless in Redmond. He was hired in December after the company's board ousted former CEO Gary Forsee.

He cautioned that shareholders shouldn't expect significant improvement in the company's finances until the end of 2008.

"Improving our performance will take time," he said.

Chairman James Hance Jr. placed the blame where many already have — on Sprint's struggle after buying Nextel in 2005 to integrate that company's network and corporate culture with its own.

"Over the course of merging Sprint and Nextel, we lost our focus on how we attract, serve and retain our customers," Hance said. "As a result, we lost ground to our competitors. Too many good customers have walked out the door unhappy with us."

Hesse said the company will work to retain high-quality customers through improved customer service and special offers. For example, it plans to roll out in June a device like Apple's iPhone, called the Instinct, and sell it only to existing customers at first.

Sprint also continues to weed out subscribers who have trouble paying their bills and don't spend much on lucrative data services such as Internet surfing or video.

Hesse said Sprint is seeking devices and services that will distinguish its brand from those of rivals AT&T Mobility and Verizon Wireless.

A chief new distinction is the company's partnership, announced last week, with Kirkland-based Clearwire to sell high-speed wireless broadband services using WiMax technology.

WiMax is similar to Wi-Fi service in that it promises download speeds far faster than current wireless networks for video, games and other data services. But WiMax covers much larger areas than Wi-Fi.

Hesse said AT&T and Verizon, which are pursuing a different technology, are "at least" two years behind Sprint.

"Sprint will be the only wireless carrier providing landline-level capability to mobile customers," he said.

Roberts, who bought Nextel stock in 1994, said he was still amazed at what a "disaster" the combination of Nextel and Sprint has been. Sprint reported an annual loss last year of $29.5 billion after writing off much of the remaining value of the Nextel purchase.

Roberts said later he was willing to give Hesse a chance. "They're turning around an aircraft carrier here, not a small boat," Roberts said. "But he doesn't have unlimited time.... "

Shareholder Gilbert Flaming, of Silver Spring, Md., said Hesse will need "a good couple years" to pull off the turnaround. But Flaming was optimistic there was enough growth in the overall wireless market to keep Sprint afloat.

"I think you can be a minority player in the market and still be profitable," he said.

Shareholders approved a slate of nine directors to the board and voted down an investor-sponsored proposal that would have given investors greater ability to call shareholder meetings. It got 46 percent of the vote.

Sprint shares fell 18 cents to $9.06 Tuesday.