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Sprint Forces Forsee Out

Bang…Zoom! — The Honeymooners

Sprint Nextel may find that replacing Chief Executive Officer Gary Forsee isn’t enough to revive the third-biggest U.S. mobile-phone company, says Bloomberg.

Sprint ousted Forsee yesterday and decided to recruit candidates for the post from outside the Reston, Virginia-based company. The company lost 337,000 customers in the third quarter, Sprint said in a statement yesterday.

Broadband Reports asks, Are Sprint’s WiMax Plans In Trouble? Some investors question Sprint’s multi-billion commitment to building a WiMax network, although that expense has been reduced with their Clearwire partnership.

Another major expenses is the the 2 GHz frequency rebanding project, which requires Sprint Nextel to buy new gear for television stations. That will enable Sprint to move their interference-prone Nextel network out of their current band, and consolidate their operations on the 800 MHz and 2 GHz bands.

As part of its 2004 agreement with the FCC , Nextel promised to pay at least $4.86 billion to move out and move to clear channels at 800MHz and 1.9GHz, completing the job in three years. But many of the negotiations between Sprint Nextel and local authorities have landed in protracted mediation while interference has continued.

Under the Consensus Plan agreed to in 2004, public service agencies will gain use of the 700 and 800 Mhz bands currently operated by Nextel that were causing interference:

Nextel would exchange 16 megahertz of spectrum spread around the 700 MHz, 800 MHz and 900 MHz bands for 6 megahertz in the 800 MHz band and 10 megahertz in the 1.9 GHz band.
Nextel will then have 16 megahertz of contiguous spectrum in the 800 MHz band, on which the carrier could continue to offer its voice service, and 10 megahertz in the 1.9 GHz (PCS) band to offer “3G” services in the future.
Nextel would then have a total of 26MHz, about what it had before the move, but allocated differently to avoid interference and consolidate their spectrum bands in 800 Mhz and 1.9Mhz.

At its Sept. 11 meeting, FCC commissioners unanimously approved an order outlining new obligations for Sprint Nextel because the wireless carrier failed to meet the 18-month benchmarks included in the commission’s original rebanding order of 2004.

Under the new order, Sprint Nextel must complete the clearing of all Channel 1-120 incumbents that are not located near the Mexican or Canadian borders by Dec. 26. The National Public Safety Planning Advisory Committee (NPSPAC) licensees will have 90 to 110 days, depending on the number of radio units operating in their systems, to complete planning after a planning-funding agreement is reached with Sprint Nextel. Many participants believe will not be finished for at least two years after the project’s scheduled completion date of June 27, 2008.

Even with new leadership, Sprint may have a tough time meeting the challenge of stitching together Nextel and Sprint networks after the $36 billion purchase of Nextel Communications in 2005. The stock has fallen 22 percent since the acquisition, customers still complain about dropped calls, and new ads haven’t stemmed the loss of subscribers, says Bloomberg.

“The problems that Sprint Nextel has are bigger than Gary Forsee,” said Chris King, a Stifel Nicolaus & Co. analyst in Baltimore who rates the shares “hold” and doesn’t own them. “This is certainly not a story that’s going to be turned around in six months or so, regardless of who’s in charge.”

“The bottom line for investors is stock price,” New York- based Nelson said. “Ultimately the chairman and CEO is responsible for a lot of the credit and a lot of the blame, whether right or wrong. I think that’s part of the job of holding the No.1 position.”

Forsee’s executive termination package, including stock options, health benefits and retirement fund contributions, was valued at $55.5 million on Dec. 29, 2006, according to a regulatory filing from April.

Forsee is one of the fathers of Sprint’s WiMax strategy. Sprint can how offer twice the speed at half the cost of AT&T and Verizon. They bought nationwide 4G spectrum for a song. It melds well with their PCS cellular penetration and almost certainly delivers more bang for the buck.

AT&T and Verizon will have to wait 3-5 years to compete with LTE — with new everything and expensive spectrum.

What Forsee didn’t foresee is the expense of the Nextel merger and the precipitous drop of Nextel subs. But Forsee seems like a scapegoat. Short-sighted investors like Ralph Whitworth add little value.

No wonder Forsee prepared a golden parachute. He was ready for flack.