Sprint Nextel Corp Chief Executive Officer Dan Hesse agreed to return $3.25 million of his compensation, which had been increased in 2011 by excluding the costs of adding Apple Inc’s iPhone to the carrier’s network.
The Overland Park, Kansas-based carrier, which sells the iPhone at a loss, originally excluded the device’s cost from 2011 bonus calculations for eligible employees. After “feedback from some shareholders,” Hesse said he would reduce his salary in 2012 to repay the costs associated with the adjustment, according to a filing.
“I do not want, nor does our Compensation Committee want, to penalise Sprint employees for the company’s investment with Apple,” Hesse said in a letter to Sandra Price, senior vice-president of human resources at Sprint, that was part of the filing.
Hesse’s decision to repay the funds comes amid uncertainty over whether the iPhone will help orchestrate a turnaround at Sprint so it can compete better with rivals AT&T and Verizon Wireless. The company, the third-biggest wireless carrier in the US, reported a wider loss in the first quarter amid contract user defections and has posted annual losses for the past five years.
For 2011, Hesse had received $11.9 million, a 31 per cent increase from a year earlier. He also got stock awards worth $3.2 million and non-equity incentive plan compensation of $4.8 million.
“Dan enjoys the full support of our board of directors and we appreciate the leadership he has demonstrated....,” Sprint Chairman James H Hance said in the statement.
Shares of Sprint declined 45 per cent last year as it posted a loss of $2.89 billion.
Sprint started carrying the iPhone last year and in the first quarter sold 1.5 million of the devices, helped by its $99.99-a-month unlimited calling-and-data plan that Verizon Wireless and AT&T don’t offer.
The iPhone also helped boost contract customers’ average monthly bills by 6.6 per cent to $59.88, from a year earlier, as users spent more on data plans.
In the first quarter, sales rose 5.1 per cent to $8.73 billion, ahead of analysts’ estimates as the company’s loss widened to 29 cents a share from 15 cents a year earlier.
“I think the underperformance of the stock has resulted in a more vocal shareholder base, and to the board’s credit they are listening and implementing,” said Walt Piecyk, an analyst with BTIG LLC in New York, in an e-mail.
Reductions to Hesse’s 2012 compensation will come from cuts to his salary and incentive-plan payments.