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Thu August 7, 2014
Failure Of Sprint Merger Bid Leaves Kansas City Unsure About Future
The death of a merger proposal between Sprint and T-Mobile may have been bad news for the Kansas City company — stock prices dropped 19 percent Wednesday. But the news has some locals breathing a sigh of relief. It means Sprint is staying put, for now.
Sprint may be a distant third in terms of wireless carriers in the United States. But here in Kansas City, it’s one of our biggest employers. That’s in addition to generating business for other local companies, lending its name to the Sprint Arena and the NASCAR championship, and being a major philanthropic donor.
When rumors circulated this summer about a $32 billion merger between Sprint and the up-and-coming T-Mobile, some Kansas Citians were nervous that that might mean a move for the company’s headquarters.
Last Friday, federal regulators, who have always been anti-merger, squelched the deal by preventing the two companies from bidding jointly on wireless spectrum. That was seen as a sign to Sprint and T-Mobile that the deal would never go through.
While locals might be relieved that Sprint isn’t going anywhere, the failure of the rumored merger bid, widely reported but never officially announced, means the company needs to change strategy. That starts at the top.
Wednesday morning, Sprint announced that CEO Dan Hesse (who at one time served as the face of the company) was stepping down.
Hesse led Sprint for the past six years, cleaning up the mess left by the 2006 Nextel merger, shepherding the company through the recession and re-building its much maligned network.
Hesse wasn’t expecting to stay at Sprint through a merger. In June, he told KCUR’s Steve Kraske that he was already thinking about future plans.
“There’s running other companies, you can see my passion around digital music, there’s lots to do in that arena. There’s boards of directors, there’s travel,” Hesse said. “I want the next decade of my life just to be wonderful.”
Hesse’s replacement was announced Wednesday morning: Marcelo Claure, the 43-year-old founder and CEO of Brightstar, a wireless services company also owned by Sprint’s parent company Softbank. Claure might provide the kind of brash leadership that Sprint was hoping to get out a merger with T-Mobile.
“The hope here is that with a CEO change, you’re bringing in a younger, fresher individual,” says Angelo Zino with S&P Capital IQ Equity Analysts. “One that has a pretty good history with his start-up company, Brightstar. They’re kind-of hoping that he can bring that success into Sprint.”
Claure is planning to move to Kansas City, which Greater Kansas City Chamber of Commerce president Jim Heeter sees as a good sign.
“That’s a strong indication of Sprint’s continuing commitment to our community, and we look forward to showing him all that Kansas City has to offer,” Heeter says.
Sprint continues to lose subscribers, and its network upgrades will only be complete at the end of next year. In the meantime, Zino says the company needs to redefine itself to consumers.
“What they need to do is give the customer what they want, and that means providing more flexibility with plans and offering lower prices,” Zino says.
And in the backyard of Sprint’s 200-acre campus, Overland Park Chamber of Commerce president Tracey Osborne says local businesses are watching.
“It creates a great deal of speculation and a little bit of uncertainty for us going forward,” Osborne says. “At this point, I think we just have to wait and see.”
And while Sprint is revamping its image – it could start at home. In a recent poll Kansas Citians recently ranked Sprint not third but fourth among the wireless networks in local performance.