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12/18/2007
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Sprint Hires Telecom Vet Dan Hesse As CEO

Hesse faces a host of challenges, including whether to proceed with Sprint's scheduled $5 billion rollout of WiMax and how to stop customers from defecting.

As Daniel R. Hesse takes over as president and chief executive of asset-rich Sprint Nextel, he immediately faces a daunting list of challenges headlined by the wireless service provider's growing exodus of subscribers.

Named Tuesday to head the nation's third-largest mobile phone service provider, Hesse had been serving as CEO of Embarq, which contains the former local phone assets of Sprint. Hesse must make a decision soon on whether to proceed with Sprint's scheduled $5 billion rollout of WiMax. When he's finished with that, he has to figure out how to keep former Nextel subscribers, who have been defecting for rival services, from dropping their Sprint Nextel service.

"There is no company in the wireless industry with a stronger set of assets," Hesse said in a statement. "I believe through solid execution and commitment to our customers we can reinvigorate our operating performance and return the company to a growth trajectory. We will review every aspect of our strategy."

Hesse, 54, was a logical choice for the position. He is intimately familiar with Sprint from his year as CEO of Sprint's Local Telecommunications Division. Moreover, he wasn't involved in the disastrous aftermath of Sprint's acquisition of Nextel. He is a telecommunications pro with 23 years of experience at AT&T, where he served as head of its Wireless Services operation between 1997 and 2000.

One thing that made him particularly attractive to Sprint's board of directors was his leadership of Embarq after the unit was spun out from Sprint and after its stock began trading in May 2006. Embarq's stock quickly zoomed ahead by more than 33% during a period when Sprint's stock plunged. He was also at the helm of Embarq as it introduced a brace of innovative services and products.

Hesse and Embarq have been headquartered in Overland Park, Kan., at Sprint's ancestral headquarters, but the company has said its executive headquarters will remain in Nextel's old Reston, Va., offices. Hesse was required to move to Kansas when he took over Sprint's landline operation in 2005, and he is now faced with another move.

Hesse's command of telecommunications technology will be sorely tested at Sprint. The company is forging ahead with two competing technologies -- CDMA2000 EV-DO and WiMax -- and he will be challenged to find a way to make them complementary at an affordable cost. Sprint has to stick with CDMA to keep its core user base, so the trick will be for Hesse to figure out how to utilize WiMax or how to spin it off gracefully with minimal cost damage.

WiMax was embraced by Sprint's former chief, Gary Forsee, and the effort was widely viewed as one of the reasons he was eased out of the top job.

Sprint is rolling out WiMax trials in Chicago and Washington, D.C., but its recent abandonment of a WiMax partnership with Clearwire may be a hint it is prepared to jettison the wide area wireless technology.

In a related development, Embarq said Tom A. Gerke will take over as interim CEO at Embarq. Gerke has been Embarq's general counsel. Embarq said it's searching for a permanent CEO.

Embarq director Bill Owens was named nonexecutive chairman of the board.

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