Sprint’s CEO Dan Hesse has agreed to have his compensation slashed by $3.25 million under the pressure of Sprint’s shareholders who are unhappy about the high upfront costs that Sprint has to pay for the iPhone. Sprint plans to buy $15.5 billion worth of iPhones over a couple years but won’t make a profit on the iPhone deal until 2015.
This isn’t the first time that Sprint’s board has expressed dissatisfaction with the direction of Sprint and Hesse’s leadership. Earlier this year Sprint and MetroPCS were reportedly “hours away” from announcing an $8 billion merger agreement, but the deal was thwarted by Sprint’s board of directors; Hesse was reported to have endorsed the deal.
But when it comes to the expensive iPhone deal, could Hesse have done any better? AT&T and Verizon had to go through similar expensive growing pains, too, when they landed the iPhone deal, and all the carriers seem like they’re starting to get fed up.
The idea is that the loss that Sprint (and the other carriers) take on the expensive iPhone subsidies early on will be made up by strong mobile data revenue over many years. For example, as Verizon loses $400 on every iPhone sold, it makes up for that loss and then some through data plans. The reality is that the carriers don’t have much choice when so many customers want the iPhone and are making more money with the iPhone than without it.
Still, when Apple has such a stranglehold on the mobile market, perhaps it’s not surprising that shareholders are channeling some of their angst into the ones leading the ships.