Sprint Deal Hopes Dialed Down - TheStreet

Sprint Deal Hopes Dialed Down

The telco's CEO pick all but kills the likelihood of a takeover.
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Sprint's

(S) - Get Report

choice of industry veteran Dan Hesse as CEO puts the company on a comeback trail but kills the likelihood of a takeover.

Shares, which have been languishing near four-year lows, slipped even further on the news.

While Hesse is seen as probably the best candidate to fix Sprint, a vocal portion of Wall Street saw the broken phone shop as a sweet piece of deal bait.

The move all but squashes the possibility that Sprint will see another offer from investors who may have liked the management shakeup proposed by former Nextel CEO Tim Donahue.

Last month, Sprint rejected a $5 billion investment offer from a group led by Donahue including South Korea's

SK Telecom

(SKM) - Get Report

and private-equity shop Providence Equity Partners. Donahue then

took his plan to some of Sprint's largest institutional shareholders.

Sprint fans say they are relieved the CEO search is over and that an executive of Hesse's caliber is taking control. But there are some misgivings about Sprint's exit from the big takeover sweepstakes.

It doesn't help them get in a deal, "but that's fine," says one money manager who owns Sprint stock. "I think if Hesse can turn it around, that would be much more shareholder value added."

For the past two years, Hesse ran Sprint's local phone business, which was spun off as

Embarq

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. Analysts point out that Hesse lives in the Kansas City area and say it's only a matter of time before he reconsolidates the headquarters back on Sprint's Overland Park, Kan., campus. After the Nextel merger, Sprint used Nextel's Reston, Va., offices as its official headquarters.

"He has deep operations experience in both wireless and wireline," says Forrester Research analyst Lisa Pierce. "He's the best for the job. I don't know that they could have found someone better that would be willing to do the job."

Top on Hesse's list of tasks will be Nextel's neglected and overburdened iDEN network. Sprint's high defection rate among its lucrative Nextel customers has crushed the company's subscriber numbers and profit picture at a time when wireless growth has been robust.

Hesse could also revive Sprint's business services unit, a division that has nearly vanished from the so-called enterprise market where rivals

Verizon

(VZ) - Get Report

and

AT&T

(T) - Get Report

have gained strength.

Sprint shares fell a nickel to $13.86 Tuesday.