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Sprint CEO returns $3.25M in pay after shareholders deride Apple deal

post #1 of 45
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In an effort to placate shareholders upset over Sprint's iPhone deal with Apple, the company's chief executive has returned more than $3.25 million in compensation.

The move by Sprint CEO Dan Hesse was revealed this week in a filing with the U.S. Securities and Exchange Commission, and highlighted by the Kansas City Business Journal. Shareholders had expressed unhappiness that Sprint had excluded the financial effect of carrying Apple's iPhone when calculating employee bonuses.

"I do not want, nor does our Compensation Committee want, to penalize Sprint employees for the company's investment with Apple," Hesse said in a letter announcing his decision. "I'm hopeful these actions will allow the company to remain focused on delivering the best overall customer experience in the wireless industry, which is what will serve the company best in the long run."

Last year, it was said that Sprint had agreed to purchase 30.5 million iPhones from Apple for nearly $20 billion over the next four years. The deal was characterized by The Wall Street Journal as a play that "bet the company" on the iPhone.

Hesse reportedly told his company's board of directors in August that Sprint will likely lose money on the deal with Apple until 2014, but he is expecting that the addition of the iPhone to Sprint's lineup will help turn the carrier's struggles around.

Dan Hesse
Sprint CEO Dan Hesse, via Wikipedia.


Sprint announced last month that it sold 1.5 million iPhones in the first quarter of calendar 2012, with 44 percent of those sales going to new customers. For the iPhone 4S launch window, Sprint sold 1.8 million iPhones, and 40 percent of those went to subscribers who were new to the company.

Hesse defended his company's deal with Apple in March, saying that users of the iPhone are "more profitable" on a whole when compared with users of other devices, like those running Google's Android platform. Besides having a low churn rate, iPhone users also use less data on average than other smartphone users, Hesse said.

"So from a cost point of view and a customer lifetime value perspective, [iPhone users] are more profitable than the average smartphone customer," Hesse said.
post #2 of 45
Quote:
Besides having a low churn rate, iPhone users also use less data on average than other smartphone users, Hesse said.

 

iPhone users use less data but they somehow make up 95% of all web traffic?  I'm curious how this adds up.

post #3 of 45
Quote:
Originally Posted by brutus009 View Post

 

iPhone users use less data but they somehow make up 95% of all web traffic?  I'm curious how this adds up.

I'd imagine that it's because iPhone users probably tend to use Wi-Fi for a lot of their web browsing.  I'd guess that over 90% of my data usage on my iPhone is via Wi-Fi, if not more.

post #4 of 45
It's interesting how Hesse's statements disagree with AT&T's. AT&T claims that iPhone users use a lot of data while Sprint says they do not.

As for the rest, it shows a clear short term view by the shareholders. If Hesse is correct, then the investment in iPhones will pay off because iPhone customers are more profitable for the carrier. It is not surprising that the benefit is in the future - that's the nature of the mobile business in the U.S. The carrier provides a large subsidy on new phones so they are in the hole at the start and only recover that investment over time. Note how AT&T's profits dropped temporarily when the iPhone was first introduced. If the investors don't understand the nature of the business, maybe they should invest in a different stock.
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post #5 of 45

Good luck with selling 30 million iPhones in 4 years, if during these blow-out quarters you only sold 5% of that...

 

Isn't it funny how struggling companies rush to pour money into Apple's bursting coffers?

post #6 of 45

Hang on Mr, CEO. I'm one person who will be going back Sprint as soon as my contract with ATT is over. 

post #7 of 45
Quote:
Originally Posted by jragosta View Post

It's interesting how Hesse's statements disagree with AT&T's. AT&T claims that iPhone users use a lot of data while Sprint says they do not.
As for the rest, it shows a clear short term view by the shareholders. If Hesse is correct, then the investment in iPhones will pay off because iPhone customers are more profitable for the carrier. It is not surprising that the benefit is in the future - that's the nature of the mobile business in the U.S. The carrier provides a large subsidy on new phones so they are in the hole at the start and only recover that investment over time. Note how AT&T's profits dropped temporarily when the iPhone was first introduced. If the investors don't understand the nature of the business, maybe they should invest in a different stock.

What's the point of basing pay on profitability if you're going to change the rules after the fact?  Surely this isn't the first long term supplier agreement Sprint ever signed?  If you wanted to exclude long term supplier agreements from your calculations, shouldn't that have been stipulated up front?

 

Just another example of pigs at the trough hoping nobody notices they're fleecing the owners.  No different than government employees voting yes on their own generous pay rises.

post #8 of 45
Quote:
Originally Posted by brutus009 View Post

 

iPhone users use less data but they somehow make up 95% of all web traffic?  I'm curious how this adds up.

I imagine one way it adds up is that Sprint is new to the iPhone game, so the users they've got now may in fact use a lot less data service.

 

That being said, I think the wifi thing plays a big part too.  In previous posts, I mentioned that a lot of low income people I know have Android phones because they can get them on prepaid mobile plans.  For many of those people, the Android phone is their ONLY internet access, they don't have internet access at home and so don't have wifi to connect to when at home.  Everyone I personally know that has an iPhone also has wifi at home that they use with their phone.

post #9 of 45
Quote:
Originally Posted by DrDoppio View Post

Good luck with selling 30 million iPhones in 4 years, if during these blow-out quarters you only sold 5% of that...

Well they've sold 3.3 million in the first two quarters since they got it, which is 11%.  

post #10 of 45
Quote:
Originally Posted by cameronj View Post

What's the point of basing pay on profitability if you're going to change the rules after the fact?  Surely this isn't the first long term supplier agreement Sprint ever signed?  If you wanted to exclude long term supplier agreements from your calculations, shouldn't that have been stipulated up front?

Just another example of pigs at the trough hoping nobody notices they're fleecing the owners.  No different than government employees voting yes on their own generous pay rises.

You're missing the point.

Hesse earned the bonus based on the details of his contract. The money was his. Yet he voluntarily returned it to try to appease his critics.

Personally, I'd have ignored them and continued to run the company the way I was hired to do.
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post #11 of 45
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Originally Posted by Tildeboy View Post

I imagine one way it adds up is that Sprint is new to the iPhone game, so the users they've got now may in fact use a lot less data service.

 

That being said, I think the wifi thing plays a big part too.  In previous posts, I mentioned that a lot of low income people I know have Android phones because they can get them on prepaid mobile plans.  For many of those people, the Android phone is their ONLY internet access, they don't have internet access at home and so don't have wifi to connect to when at home.  Everyone I personally know that has an iPhone also has wifi at home that they use with their phone.


iphone users try to connect to wifi whenever they can. I'm on the unlimited plan on Verizon (grandfathered) and I barely use 250MB of 3G data a month.

post #12 of 45
Quote:
Originally Posted by cameronj View Post

Well they've sold 3.3 million in the first two quarters since they got it, which is 11%.  

It is only 16 quarters total. That is 12.5% of the quarters...

post #13 of 45
Quote:
Originally Posted by Wovel View Post

It is only 16 quarters total. That is 12.5% of the quarters...

 

Which means Sprint is only a little behind the mark for iPhone sales.  30M over 16 quarters would mean selling 1.875M phones per quarter.  That's an achievable goal.

post #14 of 45
Quote:
Originally Posted by DrDoppio View Post

Good luck with selling 30 million iPhones in 4 years, if during these blow-out quarters you only sold 5% of that...

 

iPhone sales are steadily increasing on all carriers.  Even if Sprint sales stayed constant at 1.8 million per quarter, which is the latest number, the total after 14 more quarters would reach 28.5 million.  If you project any increase at all, 30 million looks like a safe bet.

post #15 of 45
Quote:
Originally Posted by jungmark View Post


iphone users try to connect to wifi whenever they can. I'm on the unlimited plan on Verizon (grandfathered) and I barely use 250MB of 3G data a month.

Exact same thing here.  I generally use 200-250 of 3G.  But Im $29 monthly unlimited on Verizon and look forward to unlimited 4G/LTE.  If it werent for that I'd drop to a cheaper plan.

post #16 of 45
Quote:
Originally Posted by SSquirrel View Post

 

Which means Sprint is only a little behind the mark for iPhone sales.  30M over 16 quarters would mean selling 1.875M phones per quarter.  That's an achievable goal.

Only if sales increase. With half a year before the new iPhone, it doesn't look too certain.

post #17 of 45

Putting his money where his mouth is. That's the kind of leadership this country needs!

post #18 of 45
Quote:
Originally Posted by DrDoppio View Post

Only if sales increase. With half a year before the new iPhone, it doesn't look too certain.

 

... and then they will sell [on edit - 12 million] units of the new iPhones over 5 quarters and Hesse will look like a genius.


Edited by island hermit - 5/8/12 at 7:28am
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post #19 of 45
Quote:
Originally Posted by DrDoppio View Post

Only if sales increase. With half a year before the new iPhone, it doesn't look too certain.

 

Sales increase with each new iPhone launch, so it looks more certain than otherwise that they will continue to and that Sprint will meet or exceed their commitments.

post #20 of 45
Quote:
Originally Posted by jragosta View Post

It's interesting how Hesse's statements disagree with AT&T's. AT&T claims that iPhone users use a lot of data while Sprint says they do not.

 

I think this is partly explained by Sprint's network infrastructure. Apple's iPhone is connecting to Sprint's relatively pokey EV-DO (3G) network, allegedly the slowest of all four major network's 3G networks. Many of Sprint's other smartphones connect to their speedier, well-deployed 4G WiMax network, so those devices are using up a lot more data (Sprint is also deploying a 4G LTE network to replace the WiMax one).

 

AT&T has been a relatively latecomer to the 4G game; they have a handful of LTE markets and most of the rest of the "4G" is actually HSPA+ which is slightly faster than their 3G HSPA network. Since the LTE coverage map is so new and limited in terms of market deployment, most of AT&T's smartphones are still on 3G.

post #21 of 45
Quote:
Originally Posted by Wovel View Post

It is only 16 quarters total. That is 12.5% of the quarters...

So you're saying they're right on pace?  How terrible.

post #22 of 45

Duh.  Of course their users use WiFi.  They are stuck on a 3G network.  Wait until the iP5 comes out and they have no LTE footprint.  THEN the howling will really ramp up.

post #23 of 45
Quote:
Originally Posted by dequardo View Post
Duh.  Of course their users use WiFi.  They are stuck on a 3G network.  Wait until the iP5 comes out and they have no LTE footprint.  THEN the howling will really ramp up.

 

But Sprint has LTE. And everyone else is also "stuck" on a 3G network. And the 5th iPhone is already released.

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post #24 of 45
Quote:
Originally Posted by dequardo View Post

Duh.  Of course their users use WiFi.  They are stuck on a 3G network.  Wait until the iP5 comes out and they have no LTE footprint.  THEN the howling will really ramp up.

The iPhone "5" is the 4S (5th generation)... when the 6th generation comes out later this year, Sprint could be in trouble if they don't have a substantial LTE footprint in place. 

 

I'm not holding my breath that AT&T will have it in my area by then, but I'll (hopefully) upgrade anyway. 

post #25 of 45

As long as ATT and Verizon back out of their "unlimited" data plans people will switch to Sprint (unless their work pays for the phone).  Sprint has an LTE network and will get the LTE iPhone.  As customers compare real data plans and look at no unlimited LTE with ATT and Verizon and unlimited LTE with Sprint the choice gets much easier.  Over the course of a 2 year contract Sprint will grow their LTE to cover more of the country.

 

I think Sprint will grow into a strong competitor to ATT and Verizon.

 

James

post #26 of 45

"iPhone users use less data but they somehow make up 95% of all web traffic?  I'm curious how this adds up."

 

Probably because Sprint is so slow that even if their users were on 3G continuously, they wouldn't suck that much data down. lol.gif

post #27 of 45

I read in this that Hesse was protecting employees' interests from the negative effect of the investment with Apple by excluding the cost of Sprint's contract from the calculation of employee bonuses.  Then, to appease investors he returned his own benefits.  If true, he's a great boss to have. :)

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post #28 of 45

A great boss but a terrible CEO.

post #29 of 45
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Originally Posted by drobforever View Post

A great boss but a terrible CEO.

Exactly

post #30 of 45
Quote:
Originally Posted by jragosta View Post

It's interesting how Hesse's statements disagree with AT&T's. AT&T claims that iPhone users use a lot of data while Sprint says they do not.
 

 

Define 'a lot'. ATT has a lot more iPhone customers so they could be viewing everything over 1GB as 'a lot', particularly when they have millions of customers at that level. 

 

Sprint on the other hand has many fewer iPhone customers so them them 'a lot' could be over 3GB. and given their service issues since they got the iPhone few folks have probably hit that level at least on a regular basis

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post #31 of 45
Quote:
Originally Posted by charlituna View Post

Define 'a lot'. ATT has a lot more iPhone customers so they could be viewing everything over 1GB as 'a lot', particularly when they have millions of customers at that level. 

Sprint on the other hand has many fewer iPhone customers so them them 'a lot' could be over 3GB. and given their service issues since they got the iPhone few folks have probably hit that level at least on a regular basis

Read AT&T's interpretation here:
http://www.appleinsider.com/articles/12/05/04/att_ceo_bemoans_iphone_unlimited_data_imessage.html

He's obviously referring to usage per user.
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post #32 of 45

Smart CEO.

 

 

Sprint has amazign customer retention and currently the best pricing plans.

 

 

They also don't complain to customers for giving them what they want (*ahem* ATT*cough*"unlimited...*)

 

 

Of course the company is taking a risk.  That is what the greats do.

 

 

I also imagine that allows Sprint a great deal on the phones.

 

 

This guy is maing baseline moves that will serve his company very well in the near term and long term.

 

 

Similar to what Apple did with NAND Flash.

 

 

Some investors simply can't see beyond what's directly in front of them.

 

 

I just hope they give him back his 3+ million with interest in a few years!

post #33 of 45

dbl

post #34 of 45

Sprint is like a big dog turd that people are trying to remoisten every time it starts to dry out.  It's a dog turd and will always be one.  Let it dry out and break up into little pieces and be reclaimed by nature.

 

In my opinion sprint is worthless.  They have tries to rip people off for many years.  Taken advantage of their money and promised things that never came to the light of day.  It would please me greatly to see sprint get chopped up by the other carriers and sold off.  An estate sale.

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post #35 of 45
Quote:
Originally Posted by RedGeminiPA View Post

The iPhone "5" is the 4S (5th generation)... when the 6th generation comes out later this year, Sprint could be in trouble if they don't have a substantial LTE footprint in place. 

 

I'm not holding my breath that AT&T will have it in my area by then, but I'll (hopefully) upgrade anyway. 

Fine.  6th generation. iPhone 5.   Still won't be an LTE footprint to make any dent by then,  How's WiMax working years down the road???

 

One bitten twice shy.

post #36 of 45
Quote:
Originally Posted by dequardo View Post
Fine.  6th generation. iPhone 5.   

 

No. Six. lol.gif

 

Quote:

Still won't be an LTE footprint to make any dent by then,

 

How do you know that? And how much LTE does AT&T have? Verizon should have a fair bit by October, for sure, but even they'll still be dots on a map, not a connected blob.


Edited by Tallest Skil - 5/8/12 at 11:23am

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Originally posted by Marvin

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post #37 of 45
Quote:
Originally Posted by jragosta View Post

It's interesting how Hesse's statements disagree with AT&T's. AT&T claims that iPhone users use a lot of data while Sprint says they do not.
As for the rest, it shows a clear short term view by the shareholders. If Hesse is correct, then the investment in iPhones will pay off because iPhone customers are more profitable for the carrier. It is not surprising that the benefit is in the future - that's the nature of the mobile business in the U.S. The carrier provides a large subsidy on new phones so they are in the hole at the start and only recover that investment over time. Note how AT&T's profits dropped temporarily when the iPhone was first introduced. If the investors don't understand the nature of the business, maybe they should invest in a different stock.

I also thought it was interesting to juxtapose Hesse's attitude with Stephenson's. Summarized as: "those who don't have it want it, and those have it forgot how much business and prestige it brought them and wish they didn't have it because it highlights the deficiencies in their network."

In reality, long before iPhone came out, the carriers were struggling to find out how to sell people their data services (those first-gen networks were only dialup speed), and of course, few people had smartphones, and the majority of Americans just paid for and used voice service. iPhone solved that by making smartphones attractive to everyone, not just corporate manager types who needed to be on email all the time. I used mobile IE on Windows Mobile and it was full of fail. The first Safari browser on the first iPhone was a revelation. And it brought demand for "mobile Internet" out of a business niche. Now it seems that everyone has a data plan. That's progress. Too bad AT&T's Stephenson has to be a Luddite about it.

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post #38 of 45

Agree 100%.

I am new Sprint customer. I have terrible 3G speed and complained about it up to FCC. Sprint respond - "By the contract, SPRINT do not guaranteed   Data speed and service availability..." In plain English - give us your money and stop whining!

post #39 of 45
Quote:
Originally Posted by 9secondko View Post

Smart CEO.

 

 

Sprint has amazign customer retention...

You lost me there.  They're losing customers, right?

post #40 of 45
Quote:
Originally Posted by tylerk36 View Post

Sprint is like a big dog turd that people are trying to remoisten every time it starts to dry out.  It's a dog turd and will always be one.  Let it dry out and break up into little pieces and be reclaimed by nature.

 

In my opinion sprint is worthless.  They have tries to rip people off for many years.  Taken advantage of their money and promised things that never came to the light of day.  It would please me greatly to see sprint get chopped up by the other carriers and sold off.  An estate sale.

 

So, what are all these other great US carriers that don't strive to do those things you mentioned? Please, I'm dying from curiosity. You just described pretty much every carrier in existence, but in my experience Sprint is less guilty than others of these transgressions, and its the lesser of the other evils. Your seems utterly lacking in any kind of objectivity. 

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