Whoever becomes Sprint Nextel Corp's next CEO, one thing is clear: Wall Street expects the U.S. mobile service provider to scale back its ambitious plans for a next-generation WiMax high-speed network.
Analysts said they are either looking for Sprint to spin off its WiMax assets, perhaps alongside a sale of its long-distance wireline network, or at the very least they are hoping for a reevaluation of its WiMax spending plan.
The No. 3 U.S. mobile service said on Monday it is searching for a new chief executive, after more than a year of customer losses and investor frustration over former CEO Gary Forsee's plan to spend $5 billion by 2010 on WiMax.
Sprint could raise as much as $10 billion by selling its fixed-line network for $4 billion to $5 billion and partially spinning off its WiMax business for $6 billion, UBS analyst John Hodulik estimated in a note to clients.
As the new CEO, this person is in a unique position, able to take dramatic action to ensure that the company is on the right path for the future, he said. His estimate of the WiMax business is based on the valuation of Clearwire Corp, which plans to partner with Sprint on WiMax.
WiMax is an emerging technology that promises faster connections over longer distances than Wi-Fi. Intel Corp is a big promoter of WiMax, with other backers including Nokia, Motorola Inc, Samsung and Google Inc.
Sprint has regulatory obligations to build a network using the airwaves it has pegged for WiMax, which would make blanket wireless coverage over a metropolitan area more possible than the current Wi-Fi standard for short distances.
Stanford Group analyst Michael Nelson said Sprint should not spin off WiMax because it gives the company a technological edge over other service providers. But he said Sprint does need to overhaul its strategy.
I do not believe the company should be broken up. I think Sprint has extremely valuable assets, Nelson said, referring to both WiMax and Sprint's wireline business. The WiMax strategy probably should be reevaluated in terms of the timing and the amount of capital it's spending.
Nelson said he agreed with Forsee's past objections to a sale of the long-distance network, arguing that it helps Sprint save money by avoiding using rival long-distance services.
Hodulik said potential bidders for the wireline assets could include Verizon Communications Inc, Qwest Communications Inc and Level 3 Communications Inc.
WIMAX SALE OR SPIN?
Other analysts say Sprint should get out of WiMax entirely by selling the spectrum it plans to use for the service.
The fundamental thing is they have too many strategic initiatives. They need to do some rationalization, said Keith Mallinson, founder of wireless consulting group WiseHarbor.
Sprint already runs a high-speed wireless service based on EV-DO technology and an older network based on a Motorola's iDen technology. Sprint also has a joint venture with the country's top cable service providers.
Something has to give. The WiMax thing is the most obvious candidate, said Mallinson.
Sprint spokeswoman Leigh Horner said the company still expects to launch its WiMax services on a trial basis by the end of the year, with a commercial launch next year.
She said the board was now focused on finding an external candidate to be CEO, after Forsee stepped down on Monday.
The Wall Street Journal reported that Sprint's top candidates include Dan Hesse, CEO of Sprint's former local phone business Embarq Corp, and Andrew Sukawaty, head of satellite operator Inmarsat Plc.
Embarq said Hesse was happy with his current job. Inmarsat declined to comment except to note that Sukawaty recently signed a two-year extension to his employment contract.
Umesh Ramakrishnan, vice chairman of executive search firm CTPartners, which has many clients in the technology sector, suggested that Sprint consider Steve Shindler, the head of Latin American mobile operator NII Holdings.
But Stanford's Nelson suggested that Sprint go further afield as NII used to be partly owned by Nextel Communications, which became part of Sprint in 2005.
Nelson suggested John Stanton -- former CEO of Western Wireless who joined the board of Alltel after it bought Western Wireless -- as a potentially strong candidate.
I do think they need completely fresh blood to reevaluate everything in the company, said the analyst.