Sprint CEO Hesse: The Duopoly Has to Go
Aug 8th 2012 2:00PM
Updated Aug 8th 2012 2:08PM
The CEO of Sprint Nextel (NYS: S) didn't hold much back in talking to the press at company headquarters in Overton Park, Kan., this week.
Dan Hesse said he thought that a merging of companies is good for the wireless industry -- as long as it wasn't Verizon (NYS: VZ) or AT&T (NYS: T) doing the concentrating. Sprint is a distant No. 3 to those other carriers, and Hesse wants to do everything he can to keep those companies within sight.
"The industry has to deal with the issue of the duopoly. The gap between No. 2 and No. 3 players is enormous," he told reporters. "We always have been and always will be open to further consolidation, as long as it isn't AT&T or Verizon Wireless."
The current situation with AT&T and Verizon seemingly unapproachable is "not healthy" for the wireless industry, he said. "The industry does have an issue with the size of the duopoly of AT&T and Verizon."
Hesse tried last winter to put a little more flesh on Sprint's bones in a secretive attempt to gobble up MetroPCS (NYS: PCS) . Sprint's board of directors, however, had other ideas and put the kibosh on that idea. It did not think that paying a 30% premium for MetroPCS was a good move.
Hesse certainly hasn't been shy about spending Sprint's cash in its attempt to keep up with the big boys. At his urging, the company signed a four-year deal with Apple (NAS: AAPL) to buy $15.5 billion worth of iPhones. Those iPhones may have been necessary to stem the churn of customers with iPhone envy from an exodus to AT&T and Verizon, but it was a Faustian deal: Each iPhone Sprint sold shaved its profit margin a little more because of the phone's high subsidization cost.
Still, he told reporters, looking at the iPhone's popularity, "We saw no reason to bet against Apple."
Hesse also seemed to be likening Sprint's struggles in competing with AT&T-Rex and Big Red as a fight against good and evil. Sprint wants to wear the white hat, according to Hesse. "At Sprint, we describe it internally as being the good guys, of doing the right thing," he said.
One of those "right" things, according to Hesse, is continuing to offer unlimited data plans, something the duopoly has ceased to do.
With Sprint's margins improving and its average revenue per user starting to head in a positive direction, the company's future may seem a bit brighter. But Hesse is not ready to give two thumbs-up. "What you're not going to see around here are any mission accomplished signs," he said.
At least not while there are only two hungry giants roaming the countryside.
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