Since Sprint’s long-hoped-for merger with T-Mobile fell apart in November, the country’s fourth-largest wireless carrier has been getting a makeover. But investors aren’t convinced that the new strategy will do much for Sprint’s stock price, which has shed more than one-quarter of its value over the past three months.
Japanese billionaire and SoftBank Group CEO Masayoshi Son had planned to combine with T-Mobile (tmus) since 2013 when he first bought a majority stake in Sprint. But that strategy was thwarted, first by Obama administration regulators in 2014, and more recently by T-Mobile’s executive team and its owner, Deutsche Telekom.
Now Son and his handpicked Sprint CEO, Marcello Claure, have to find a way to revive the carrier without the big bang of a merger. So far, that’s required Softbank to buy more Sprint shares on the open market, invest more to improve Sprint’s network and make some executive changes in Claure’s team.
On Thursday, the latest move from Claure was the replacement of CFO Tarek Robbiati with Michel Combes, a veteran telecom executive who ran European cable provider Altice and equipment maker Alcatel-Lucent, where he was known for reviving the company by slashing spending and cutting jobs. The change follows the departures of chief operating officer for technology Günther Ottendorfer and Jeff Nelson, senior vice president of marketing growth, less than two months ago.
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Wall Street’s initial review of Sprint’s (s) latest swap on Thursday was negative, as it often is when a CFO is suddenly replaced. Some analysts were already questioning Sprint’s most recent financial guidance from Robbiati and so his departure could be an opportunity for the company to lower expectations. Sprint is presenting at a Citigroup investor conference on Jan. 10 and is expected to announce its fourth quarter results in a few weeks. Sprint shares, which have lost 26% over the past three months, were down 5% in midday trading on Thursday.
“Robbiati has stated that he expects Sprint to return to revenue growth in 2018, but we think that milestone may be out of the company’s reach this year,” BTIG Research analyst Walt Piecyk wrote on Tuesday, two days before the CFO change was announced. Piecyk and others remain concerned that Sprint has too much debt remaining from the SoftBank takeover even as it struggles to maintain its customer base and spend enough on its network to keep up with competitors.
Investors may also be less than thrilled with the Combes pick given that he resigned from Altice in November amid concerns the company had taken on too much debt and was losing customers in France, its biggest market, and Portugal. But before going to Altice in 2015, Combes was CEO of Alcatel-Lucent, where he revived the deeply struggling telecom equipment maker via ruthless cost cutting and layoffs enough to attract a $17 billion buyout offer from Nokia. Similarly, in an earlier stint at Vodafone, Combes oversaw a major cost cutting program.
Claure hinted at Combes’ past M&A experience in a statement announcing the hire. “I know bringing him on board will help to accelerate our progress as Sprint begins the next chapter of our transformation,” Claure said. “He is a visionary executive with a proven track record of successfully transforming leading telecom and media companies and will help us to execute our strategic plan and strengthen our team.”