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The departure of Sprint Nextel’s chief operating officer, Len Lauer, aged 49, comes amid problems of customer churn and disappointing results that are seen by analysts as symptomatic of problems with integrating the merger that created the company.
The third-largest US wireless carrier, with 51.7m subscribers, is in the midst of a complicated integration process following the $35bn acquisition of Nextel Communications by Sprint a year ago. It said Mr Lauer’s departure was due to a “change in the company’s organisational structure” and declined to elaborate.
As chief operating officer, Mr Lauer, a former IBM and Bell Atlantic executive who joined Sprint in 1998, was in charge of integrating the Sprint and Nextel networks, which are based on different technologies and target markedly different market segments.
Sprint Nextel has lost ground to Cingular and Verizon Wireless, its two largest rivals, as it has struggled to absorb Nextel’s 17.8m subscribers and those of affiliates of both companies, simplify its calling plans and improve credit quality.
When the company, whose headquarters are split between Reston, Virginia and Overland Park, Kansas, announced second-quarter results this month, it revealed it had added just 708,000 net new customers in the latest quarter.
By comparison, Cingular, the biggest US wireless carrier, added 1.5m subscribers and Verizon Wireless, a joint venture between Verizon of the US and the UK’s Vodafone, added 1.8m.
Meanwhile, its churn rate, a measure of customer loyalty, rose to 2.1 per cent – among the highest in the industry. Average revenue per subscriber declined 6 per cent as customers switched to new lower-priced plans.
The company said profit for the year before taxes and other expenses could fall short of forecasts, prompting several analysts to lower their ratings on the carrier.
Paul Saleh, chief financial officer, acknowledged at the time that the integration had not gone as well as planned and noted problems introducing new monthly rate plans.
In an effort to attract new customers and compete more effectively with its rivals, he said Sprint Nextel had begun offering a range of lower-priced monthly plans including discounted “family plans”, but the strategy had backfired when existing customers switched from higher rate plans.
Sprint Nextel has also suffered because of the relatively poor credit ratings of some customers.
Jeffrey Halpern, an analyst at Sanford C Bernstein, calculated that if Sprint Nextel were sold, its subscribers would be valued at $1,506 each, compared with $2,011 for Verizon Wireless subscribers and $1,934 for Cingular customers.