Thursday, August 9, 2012

Sprint CEO Talks About iPhone Decision, Other Challenges

Story first reported from USA Today

OVERLAND PARK, Kan. – By his own admission, Sprint CEO Dan Hesse isn't ready to hang out a "Mission Accomplished" sign yet. The No. 3 wireless company is in the midst of a turnaround. But, he says, "we're showing good success" in retaining customers, improvements in customer service and other metrics. Sprint last month reported a second-quarter loss of $1.37 billion on revenue of $8.84 billion. "It's blocking and tackling, quarter after quarter, year after year." Hesse hosted a group of journalists at Sprint headquarters this week. Here are highlights of the conversation, edited for space and clarity:

Q: What about the decision to sell the Apple iPhone even though Sprint had to spend billions to get that opportunity?

A: I've said everything has to make sense economically. But we knew our customers wanted the ability to choose the iPhone. We clearly looked at economics both short-term and long-term. Over time it starts to be cash-flow positive. We saw no reason to bet against Apple. You really don't want to be on the outside of that. From a brand perspective, you like having your brand associated with very strong great brands, and nobody can debate just what a great brand Apple has. We thought the benefits greatly outweighed the risks.

Q: You were a vocal opponent of the AT&T/T-Mobile merger. Are you satisfied you can compete now that the merger did not go through?

A: We're certainly working very hard. There's no question that the industry does have an issue with the size of the duopoly of AT&T and Verizon. I believe that over time we'll see more consolidation in the industry outside of the big two, because the gap in size between two and three is so enormous. Consolidation is healthy for the industry as long as it's not AT&T and Verizon getting larger.

Q: What are your thoughts on Google's acquisition of Motorola Mobility?

A: There'll be protections between the Android organization and Motorola. I can't say what will happen internally. But I honestly believe they will try very hard to keep Android's independence. We're actually looking forward to seeing what new devices the new Motorola will bring to the market.

Q: How are you positioning the Virgin and Boost brands, which offer prepaid wireless service?

A: Right now, generally the Boost brand is more kind of "talk and text." Virgin is focused a bit more on data and text. Boost tends to be a bit more urban; Virgin more suburban. Those are the basic differences.

Q: How does the growth of traditional wireless plans with contracts (postpaid) compare with the prepaid business?

A: We see increasingly that prepaid will be an opportunity for value and for customers who don't necessarily want to be tied into a contract for a couple of years. The iPhone on Virgin is an example of what we think is possible.

The (traditional wireless) business is the largest segment of the industry and, historically, it has been the most profitable. The Sprint brand is basically our (vehicle) to go after that industry. The prepaid business is growing more rapidly than the postpaid business. We doubled-down on the prepaid business a few years ago when we acquired Virgin. And we are expanding our offerings. As hockey great Wayne Gretzky reportedly once said, skate not to where the puck is but where it's going. The puck is going more to prepaid.

Q: Do you see a day when the typical household has multiple devices on the Sprint network?

A: As we look at growing overall revenue in the industry, what we're counting on is many more devices than one. We used to think five years ago that growth in the wireless industry is dead when you get to 100% penetration. Now we see numbers much north of that as customers have a variety of devices — wireless chips in your shirts, in your car, in many other areas. It's just another opportunity for us to increase revenues as an industry. We hope that over time there are a number of devices that are enabled by the Sprint platform.

Q: Will Sprint have an iPad, especially as you move to faster LTE networks?

A: I can't comment on that. But it's a very good question.

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