Dan Hesse: In the Captain’s Chair at Sprint

Dan Hesse of Sprint Nextel

Sprint Nextel CEO Daniel Hesse likes to finish what he starts.

When Hesse got the call in 1992 to take a potentially lucrative new post in AT&T’s New Jersey headquarters two years into spearheading an ambitious telecom project in the Netherlands, he told his bosses “no.”

His decision to stay could have been a career-killer — AT&T typically rotated its executives into new positions every two years, grooming them to move up the corporate ladder. While Hesse knew there was risk in remaining past that point, he recalled wanting to finish what he had begun.

The $2 billion project in the Netherlands proved to be “a big turnaround situation,” Hesse told InternetNews.com in a phone interview. “I ended up putting in five tough, hard years and left having improved the business performance of that operation very well.”

“It was about me developing my own skills and doing something for myself. I worked hard to do that and had a real sense of personal accomplishment,” said the 54-year-old Hesse, who took the Sprint (NYSE: S) helm in December 2007, two months following Gary Forsee’s departure.

Hesse’s tenacity in leadership — as well as a love of the 60’s sci-fi classic “Star Trek” — earned him the nickname “Captain Kirk” during his 23 years at AT&T. His career began at the age of 24 after earning a bachelor’s degree in European studies from the University of Notre Dame and an MBA from Cornell University.

[cob:Pull_Quote]Hesse’s first AT&T role had been negotiating financial deals with European telecoms. He then held numerous management assignments within network operations, strategic planning and product management. That led to his Netherlands assignment, part of his stint in the top spot at AT&T Network Systems International.

His desire to stick it out and finish the project ultimately didn’t seem to hurt his career at AT&T dramatically: His experience at the company culminated in serving as president and CEO of AT&T Wireless Services from 1997 to 2000.

But in 2000, Hesse stepped away from AT&T, serving from 2000 to 2004 as CEO of Terabeam, a wireless telecommunications service provider. He next took the helm at Embarq, a local telephone service provider that Sprint had spun-off in 2006 as part of its merger with Nextel. Less than a year later, he was tapped to run Sprint Nextel itself.

Despite all of the experience in the executive suite, Hesse, much like the celebrated starship captain for whom he’s nicknamed, prefers tackling problems out in the field rather than stuck at headquarters.

“Kirk always wanted to be leading the command on the Enterprise,” he explained with a small laugh, adding AT&T colleagues openly addressed him by the nickname. “I think they knew I loved ‘Star Trek’ and I took it as a compliment.”

Such determination to make accomplishments outside of the boardroom ultimately paid off for Hesse’s career. It may also prove valuable as the CEO oversees a number of critical initiatives as he aims to steer Sprint — No. 3 in the market and coping with profitability and consumer service woes — into a market-leading perch.

Steady as she goes

As Captain Kirk regularly found while battling Klingons, Romulans and other foes on “Star Trek,” leading the way in hostile territory isn’t always that easy. Likewise, it’s no simple matter for Hesse to steer Sprint forward in an industry dominated by leader AT&T and second-place Verizon Wireless.

The Overland Park, Kan.-based carrier is cemented in third place in the industry, and most recently reported a quarterly loss of $344 million, or 12 cents per share, during the second quarter. For the same period a year earlier, Sprint had posted a profit of $19 million, or 1 cent per share.

Second-quarter results also included an 11 percent revenue drop to $9.06 billion, missing analysts’ revenue expectations of $9.17 billion. Making matters worse, the company’s customer base of 51.9 million customers is also down slightly from the 54 million it reported a year ago.

In stark contrast, AT&T and Verizon Wireless both reported positive second-quarter financial results and increased subscriber numbers.

Page 2: Customer support

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Sprint is battling well-publicized internal demons as well. The most pressing issue, Hesse acknowledges, is revamping Sprint’s customer service.

In its annual wireless carrier customer service survey, released last month, J.D. Power and Associates said Sprint’s ratings made it the lone carrier falling below industry average. Verizon Wireless, for example, led with a score of 103 and AT&T came in fourth place with 97. Sprint’s score was 79 — well behind the average of 96.

As a result of changes he’s made in response to such findings, customer experience now figures as a “to-do” item on every executive meeting agenda, Hesse said. Sprint’s also boosted staff levels to reduce customer support call times.

Additionally, the carrier last week debuted its “Ready Now” program that involved training staff at all its 1,219 retail stores to better answer buyer questions and device setup requests.

While Hesse is only entering his tenth month in the position, efforts to improve customer experience seem to be working: Churn is at its lowest in two years. In the second quarter, churn was just below 2 percent, down from 2.45 percent in the first quarter, according to earnings figures.

While Sprint has slowed its customer churn and improved customer service, the CEO admits that there’s still much work ahead.

Meeting customer expectations prompted the rollout of the Simply Everything program, a $99, all-you-can-use data service rate plan pushed out in February.

“The Everything plan is innovative if you just think of what cell phones are capable of today and the rocket data speeds coming with WiMAX,” Hesse said. The CEO himself starred in a television commercial introducing the plan, during which he invited viewers to e-mail him with feedback — another nod toward improving the customer experience.

While describing Simply Everything as innovative, Hesse is also quick to admit that it’s not exactly new. In part, that’s because he launched a very similar program exactly 10 years ago in his role as AT&T Wireless’ CEO from 1997 to 2000. Today, every major wireless carrier offers several flat-rate plans.

The difference between today’s Simply Everything and the older AT&T’s Digital One Rate plan is that customer expectations and needs have changed radically, Hesse added.

Dan Hesse

“The companies are different, and the times are different,” he said. “At that point, wireless was just beginning to take off and we had all this growth ahead and there wasn’t really today’s level of competition. It was more the opportunity to get people who didn’t have wireless to adopt wireless.”

Since then, the business landscape has shifted completely. According to the wireless industry trade association CTIA, there are now 262 million wireless subscribers in the U.S. The industry is poised to set new records with service revenues hitting $72 billion in just the first six months of this year alone – already $1 billion ahead of 2007’s total revenue.

With U.S. wireless penetration so high, the main challenge has become luring the subscribers of competitors’ services with the promise of better, faster and cheaper wireless data services.

“Customers will pay a premium for simplicity, and a lot of what we did at AT&T was about that,” Hesse said, explaining how cellular service pricing had been extraordinarily complicated in the 1990s, before the advent of today’s one-rate-style plans.

“Now we’re just saying, ‘Hey, just use your phone and do everything your phone is capable of doing for 100 bucks a month,'” Hesse said. “What we’re trying to do is create the ultimate in simplicity.”

To boldly go: WiMAX and profitability

In addition to improving customer experiences, Hesse also pledged earlier this year to improve profitability.

[cob:Special_Report]Among other things, with the bottom line facing scrutiny, he’s under pressure to justify Sprint’s continued investment in WiMAX, which the carrier kicked off in 2006 with an initial $1 billion investment, and a pledge to spend a total of $5 billion on the rollout.

This past spring, it joined forces with partner Clearwire in a massive, $14.5 billion joint venture to create a national WiMAX carrier. Intel, Google, Comcast, Time Warner Cable and others also invested in the effort.

“The challenge with WiMAX is the investment required, as building out a national high-speed network means a lot of money,” he acknowledged.

Page 3: WiMAX’s potential

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But WiMAX, Hesse explained, is critical to the future of Sprint’s data network, providing the kinds of data speeds users want and expect.

Still, “we have to make sure we get a good return on investment on what obviously is a very large investment both in terms of spectrum and capital,” he added.

Hesse is also betting on Sprint’s capability to quickly recognize and take advantage of innovations in other areas in wireless technology.

In particular, he points to deals making Sprint the exclusive carrier for hot new devices like Samsung’s Instinct handset, and its efforts to support advanced wireless applications such as voice-activated GPS — which has become the CEO’s favorite smartphone feature.

“I don’t think anyone else has that,” Hesse said. “For customers, it’s about having the most applications, the unique applications and unique content. But it’s also about the rate plan and the device. He added that exclusive devices will always play a big role with consumers as “cooler and cooler ones are coming out all the time.”

Carriers have to offer a broad array of options, since “different customers want things that are important to them,” he said.

In addition, there are persistent market rumors Hesse must contend with. One has Sprint being acquired outright. Another has it selling off Nextel, and yet another claimed Sprint was seeking a technology partnership with SK Telecom.

“There has been rampant speculation on all sorts of subjects since I’ve taken the job, and that’s going to continue,” Hesse said.

However, he added that Sprint hasn’t ruled anything out in working to turn its business around.

“We are continuing to evaluate all the company’s options, and so nothing is off the table,” he added.

In the captain’s chair

The pressure may be mounting on Hesse, but he’s also finding some lighter moments to the position.

His acting debut — in the commercial that introduced Simply Everything — provided an unexpected benefit, allowing him to reconnect with high school friends that Hesse lost contact with. Hesse said his father — who was in the military — relocated the family from Germany, where he was stationed, to the U.S.

Dan Hesse of Sprint Nextel
Source: Sprint Nextel

Hesse’s increased prominence, though, has also had a few downsides. He can no longer be a “secret shopper” at Sprint stores, something he did earlier to check in on customer’s experiences. He can’t play golf anonymously, either — not that he plays much to begin with, he admitted.

“I play one round a year, and last time I did, the caddy says, ‘Hey, aren’t you the guy in the Sprint commercial?'” Hesse said with a laugh.

Of course, Hesse has far more important things on his mind besides golf — an intensity that he admits can rub some the wrong way. When asked what he’d change about himself, and his weak points as a leader, he doesn’t hesitate to name them.

“I’d listen better than I do, and a weakness of mine is that I’m impatient to a fault,” he said, adding that others have told him he can be impatient to the point of being unreasonable. “Yet … being impatient and having a sense of urgency as a leader is a positive thing.”

“I want everything… like, now,” he admitted with a small laugh, adding he believes it’s a shortcoming that wound up playing a part in his career success.

“I get things done faster as a result, but sometimes I can be a little hard on people,” he said. “It’s partially why I’ve been successful, as my expectations are high and a sense of urgency can foster innovation in a company.”

Like they were for Captain Kirk, those characteristics — along with tenaciousness and a love of hands-on leadership — may prove to be Sprint’s ace in the hole. With the company facing slipping customers and sagging levels of customer satisfaction, the CEO’s sense of urgency, coupled with his desire to finish what he starts, may mean Sprint has the chance it needs for a comeback.

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