Sprint Plans to Keep and `Rejuvenate' Nextel Network

By Crayton Harrison
Oct. 30 (Bloomberg)

Sprint Nextel Corp., the third- largest U.S. mobile-phone company, scrapped the idea of selling its Nextel wireless network, opting to ``rejuvenate'' the business instead.

Sprint, which bought Nextel Communications Inc. in 2005, extended a long-term partnership with Motorola Inc., the provider of equipment and support for the network. Boost Mobile, Sprint's prepaid phone service, will offer unlimited calling plans on the Nextel system in 2009, the company said today in a statement.

The decision puts pressure on Chief Executive Officer Dan Hesse to reverse customer losses on the network, which had 14.6 million subscribers at the end of June. Hesse, who joined Sprint in December, aims to address subscriber complaints by improving customer service and reducing the number of dropped calls.

``I've always thought there was more value internally for those assets, given the amount of integration work they've done to date,'' said Steve Clement, an analyst at Pacific Crest Securities in Portland, Oregon. He expects the shares to perform in line with the rest of the industry.

Sprint gained 31 cents, or 9.8 percent, to $3.49 at 4 p.m. in New York Stock Exchange composite trading. The shares have fallen 73 percent this year.

Losing Customers

Sprint, based in Overland Park, Kansas, trails AT&T Inc. and Verizon Wireless in U.S. mobile-phone customers. The number of Nextel customers dropped 16 percent between the end of last year and June, while subscribers on the original Sprint network held steady at 35.5 million. About 1.7 million customers have phones that can make calls on both networks.

Hesse, trying to reverse a four-quarter streak of declining sales, has introduced new phones such as Samsung Electronics Co.'s Instinct to keep customers from switching to AT&T and Verizon. The company plans to report third-quarter earnings on Nov. 7.

Hesse, 55, said as recently as August that ``every option'' would be considered for the Nextel network. Hesse put Keith Cowan, president of strategy and corporate development, in charge of developing a plan for the unit. Cowan was offered a $1 million bonus for a board-approved plan, according to an August regulatory filing.

Sprint weighed a sale, additional investments and strategic partnerships before deciding to keep the network, spokesman James Fisher said today. Hesse and Cowan were unavailable for interviews, Fisher said. He declined to say whether Cowan had received his bonus.

Next Steps

Sprint is still determining its long-range plans for the Nextel network, including how much it will need to invest, Fisher said.

``We've announced immediate actions, and we are continuing to look at longer-term actions to support the network,'' he said.

The company introduced phones in June for the traditional Sprint network that can function as walkie-talkies, just as phones on the Nextel network do. That should make it easier to persuade Nextel users to come over to the Sprint network, allowing the company to eventually shut off the Nextel airwaves, Clement said.

``They need to be working toward shutting it down and realizing whatever cost savings they can by doing that,'' he said.