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New Sprint CEO continued

By Ritsuko Ando, Reuters  |  Posted 2007-12-18 Print this article Print

Sprint Nextel Corp named the head of Embarq Corp, its fixed-line spin-off, as its chief executive, hoping the telecom industry veteran can turn the No. 3 U.S. mobile service provider around.

Whither WiMax

Investors will be looking to Hesse to help Sprint stem subscriber losses, as well as to make some critical strategic decisions such as on its plans to build a new high-speed wireless network based on WiMax technology.

WiMax has yet to be commercially proven and Wall Street has been concerned that Sprint's $5 billion target spending on WiMax is too high. Some analysts have suggested options such as scaling back the spending or spinning off the wireless unit.

Some analysts also said Hesse would have to make a decision on what to do with Sprint's long-distance business.

"I don't expect anything immediately but I do expect over the next year or two there will be some moves he'll make that will position the company better," said Yankee Group's Ayvazian.

Sprint has struggled with customer service issues. Some have said its 2005 purchase of Nextel Communications was a failure as it failed to integrate the different networks.

Sprint last month posted a 77 percent drop in quarterly profit to $64 million, or 2 cents per share, as it lost more subscribers. The company withdrew a 2008 profit target and said it would give an outlook early next year.

Many analysts said Hesse, who had been chairman and CEO of Embarq since its inception in 2006, was well-practiced in improving operations. Embarq stepped up its cost cutting by consolidating call centers, and boosted its high-speed Internet business to make up for a fall in standard phone subscribers.

Embarq shares, however, have been falling amid concerns of increasing competition from cable service providers. The shares fell 36 cents to $47.30 in Tuesday trade, a low for the year.

Embarq named its general counsel, Tom Gerke, as interim CEO and said he would be a strong candidate for the post. The company said its board plans early next year to consider an increase in cash returned to shareholders.

(Additional reporting by Tiffany Wu; Editing by Derek Caney and Tim Dobbyn)

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