Sprint Nextel CEO Daniel Hesse had gone all-in to start offering Apple’s iPhone last year. But Hesse’s decision doesn’t seem to have gone down too well with shareholders as they are not happy that the results were hit due to the heavy subsidy that Sprint has to pay Apple for the iPhone.
In response to the shareholder disappointment, Hesse has announced that he will cut his personal compensation by $3.25 million this year.
Hesse said his 2012 salary would be cut to repay about $346,000 in incentive pay that he has already received and forfeit additional amounts that he was eligible to receive under his 2011 and 2012 incentive plans.
“These voluntary actions regarding my personal compensation, which total $3,250,830, will eliminate any benefit for me to the discretionary adjustment the compensation committee made earlier this year,” Hesse said in a letter to the company’s human resources department.
Hesse actions would set his 2012 compensation back to 2010 levels.
Sprint reported net operating revenue of $8.7 billion, a net loss of $863 million and a diluted net loss of $.29 per share for the first quarter of 2012. Sprint announced that they’ve activated 1.5 million iPhones in the last quarter, of which 44% were new customers.
Sprint, the United State’s third largest carrier behind Verizon Wireless and AT&T, pays Apple 40% higher or $200 per device more subsidy compared to other phones. That hasn’t gone too well for them – even though the iPhone has attracted new customers in the last quarter.
Sprint’s shareholders disappointment for betting on the iPhone is quite surprising as Sprint really didn’t have a choice as they would end up losing customers to AT&T and Verizon if they didn’t offer Apple’s iPhone.
To highlight this point, you need to take a look at AT&T’s and Verizon’s numbers to figure out how important Apple’s iPhone is to these carriers despite the higher subsidy. AT&T activated 4.3 million iPhones, or 78% of all AT&T smartphones for the quarter and Verizon activated 3.2 million iPhones, or 51% of all Verizon smartphones for the quarter.