Sprint faces tough questions
NEW YORK (Reuters) - Sprint Nextel Corp (S.N) faced multiple questions about how it would turn the company around and stop customers from fleeing its cell phone service at its annual shareholder meeting, where voters only narrowly rejected one proposal that would have let them call special meetings.
While shareholders by a vast majority of votes approved Sprint's slate of nine board members on Tuesday, an unusually slim majority rejected a shareholder proposal to let shareholders call special meetings. About 54 percent of votes were cast against the proposal while 46 percent were in favor.
"That's very high. I think people are feeling very unhappy with where the share price has been," said Cowen & Co analyst Thomas Watts, who said shareholders may see the ability to call meetings as a way to help them take aim at directors or management instead of having to wait until the annual meeting.
Cowen noted that while current Chief Executive Dan Hesse has only been in his role a matter of months, they had not been happy with previous CEO Gary Forsee, who left in October amid steep customer losses.
Sprint shares, which have lost more than 60 percent of their value since the company bought Nextel Communications in 2005, were down 19 cents or 2.1 percent at $9.05 on the New York Stock Exchange late in the session.
The meeting was held a day after Sprint said its first-quarter net loss widened to $505 million from $211 million in the year-ago quarter, as it lost more than a million high-value customers who pay monthly bills and who commit to service contracts of one or two years.
Hesse faced tough questions about the results and the company's ability to compete with rivals during the meeting, which was webcast.
"Verizon and AT&T have been eating our lunch," in winning high-value customers, one attendee told him. "How did we get into this situation?" and how will Sprint resolve it, the person asked. Another asked why the company has performed so poorly since it bought Nextel Communications in 2005.
Hesse told shareholders that while Sprint was beginning to see improvements, turning performance around would "take time."
He conceded that Sprint's top rivals AT&T Inc (T.N) and Verizon Wireless, a venture of Verizon Communications Inc (VZ.N) and Vodafone Group Plc (VOD.L), have focused more on customers with prime credit ratings, while Sprint has more customers who have subprime credit ratings and more trouble paying bills.
He said the company would address this by focusing first on keeping its existing customers and by trying to sign on new subscribers who are committed to contracts and less likely to cancel their services as quickly as subprime customers.
"Customers leaving us, on average, have had a higher (average revenue per user) than the customers we're bringing in," Hesse acknowledged; but he said Sprint's offer of unlimited data and voice services for $99.99 a month should change that.
"We didn't have a compelling offering to keep them," said Hesse, who also said the unlimited service offering would likely reduce the number of calls to Sprint customer services, which has been blamed to a large extent for subscriber frustration.
"When you take the meter off everything, one would hope they'd never call to question their bill because it will always be the same," said Hesse.
Asked about work force reduction efforts at Sprint, which has laid off 4,000 employees, Hesse said the company would not scale back customer services operations unless customer calls were reduced.
"As we reduce the number of calls coming in, we can reduce the number of people answering the phone," said Hesse, who noted that any cutbacks would start at call centers run by third parties rather than at Sprint's in-house service operations.
(Reporting by Sinead Carew, editing by Gerald E. McCormick)
