New Sprint CEO Marcelo Claure faces great expectations

Published 5:00 pm Monday, August 18, 2014

The handpicked choice of Sprint Chairman Masayoshi Son is under pressure to produce results that have eluded the nation’s third-largest wireless company for years.

And the clock is ticking.

Sprint might not be No. 3 much longer, according to the boasts of John Legere, chief executive of No. 4 T-Mobile US Inc. Network improvements and aggressive marketing have allowed T-Mobile to narrow the gap quickly.

At last official count, Sprint’s 54.553 million wireless customers led T-Mobile’s 50.545 million. The gap was three times as large 18 months ago.

Predicting when or whether T-Mobile will surpass Sprint amounts to guesswork.

Still, Legere — expected to be Sprint’s new CEO had it managed the merger — laid down a challenge on Twitter last week as headlines trumpeted Claure’s appointment and Sprint’s merger abandonment.

Analyst Jan Dawson at Jackdaw Research did some math and wrote about Legere’s boast in a blog post: “That’s not an enormously bold claim, but I think it might be a stretch.”

A Sprint spokeswoman said Claure and the company declined to comment.

Outsiders say new chief executive Claure’s focus will be on attracting customers to Sprint — perhaps by reaching for the growing Hispanic market — while bolstering its financial performance and assuaging stockholders who saw their shares tumble 24 percent last week.

Shares fell mostly because Sprint gave up on its long efforts to buy T-Mobile. Executives concluded that regulators in Washington were not going to let the No. 3 and No. 4 cellphone companies merge.

Son turned to Claure essentially to make good on Washington’s stand that four national carriers can succeed if Sprint can become a stronger competitor on its own.

“The question is can Sprint’s new management under Claure remain aggressive and innovative and basically outdance T-Mobile,” said Berge Ayvazian, an industry consultant at UBM Tech.

Son is the founder of SoftBank Corp., which bought control of Sprint for $21.6 billion last year and, a few months later, control of Claure’s business Brightstar Corp. for $1.26 billion.

Claure promised bold moves Wednesday in brief remarks at Sprint’s online shareholders meeting. His early moves probably will include some management changes as he names his team.

Some efforts already are underway, probably with Claure’s input. He became a Sprint director in January and reportedly has been involved in strategy sessions since then.

The company has been testing new pricing plans, realizing that the Framily discount it launched in January has fallen behind price moves from other carriers.

The company also is essentially finished with a disruptive upgrade of its network. It promises better subscriber results as dropped calls and other problems fade away.

But Sprint’s network remains measurably slower than its rivals when it comes to streaming music or video, downloading apps and using other popular features of smartphones. Sprint has said it will take until the end of next year for it to complete building a faster network than its rivals have.

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Claure’s job, in part, will be getting Sprint to put on some speed. The remaining months of 2014 provide prime opportunities for wireless carriers to add customers and attempt to grab one another’s subscribers.

Back-to-school season sends shoppers after first-time cellphones for students. And Apple Inc. is expected to release the iPhone 6 a month from now.

Holiday shopping always makes the last few months of the year a big seasonal market for the wireless industry.

Claure’s bigger challenge is to capture the disruptor role that T-Mobile has played aggressively.

T-Mobile’s Un-carrier campaign has included no-contract deals, faster phone upgrades, picking up early termination fees for customers who drop contracts at other carriers, and a free network test-drive with a loaner iPhone 5.

“Sprint has to come to the same realization that T-Mobile has come to. If they’re playing by the same rules that they’ve been losing by, they need to change the rules,” said industry analyst Roger Entner at Recon Analytics.

Claure seems to be planning more than a price war, based on comments that Wall Street analyst Jennifer Fritzsche, at Wells Fargo Securities, reported Friday.

“When asked what the game plan is in terms of pricing, he would not offer specifics but mentioned it was more about value than price and said to expect Sprint to be ‘aggressive,’” Fritzsche said in a note to clients.

She quoted Claure: “We need everyone who is looking to re-up with their current carrier to give Sprint a good hard look before doing so.”

Claure brings an opportunity to build Sprint’s business in the Hispanic market, said Javier Palomarez, a former Sprint official who now heads the United States Hispanic Chamber of Commerce in Washington, D.C.

“They’re not perceived as serving the Hispanic community. That’s AT&T and Verizon territory, frankly,” said Palomarez, who worked in corporate communications at Sprint in the early 2000s.

Claure, a native of La Paz, Bolivia, has been a big supporter of the national Hispanic chamber. Palomarez said Claure knows that broadening Sprint’s work with minority- and women-owned businesses will improve its finances.

“Marcelo brings a unique set of skills, a unique cultural affinity and understanding of a market that heretofore Sprint hasn’t really focused on. Marcelo will bring that walking in the door because he understands that market,” Palomarez said.

Claure also emphasized cost cutting as one of three priorities at the shareholder meeting and in his comments to Fritzsche. Brightstar, a wholesale supplier of cellphones, operates on thin profit margins that put a premium on cost controls.

All the people in positions “of responsibility and significance at Sprint better look over their shoulder quick,” Ayvazian said. “They are going to need to show what they’re doing, how they’re going to get it done, and become both efficient and highly competitive.”