Dec. 18 (Bloomberg) -- Sprint Nextel Corp., the mobile-phone company that lost more than a million customers in the past five quarters, named Daniel Hesse chief executive officer after Gary Forsee's ouster two months ago.

The 54-year-old Hesse helped slow profit declines as head of Sprint's Embarq Corp. local-phone spinoff, closing call centers and creating packages of services. He spent more than 25 years in the communications industry, and led the largest wireless company in the U.S. as an executive at AT&T Inc.'s predecessor.

Hesse takes over the third-largest U.S. mobile-phone carrier after its stock sank 27 percent this year while users switched to bigger rivals such as AT&T, which has soared 14 percent. He may use a plan similar to his moves at Embarq, where he was cutting 1,000 jobs as subscribers shut off land lines.

``He's done an excellent job of running Embarq in very difficult times,'' Stanford Group Co.'s Michael Nelson said in an interview on Bloomberg Television. At Sprint, ``the big issue is re-addressing the company's marketing strategy. They have a strong handset lineup, but they really do not have a strong marketing message.'' The New York-based analyst advises investors to hang on to Sprint shares.

Last month, Reston, Virginia-based Sprint cut its forecasts for next year after losing the most contract subscribers since at least 2005. The company, which lost 337,000 customers last quarter, is on course for its first annual sales decline since 2003.

Sprint shares dropped 15 cents to $13.76 at 4:03 p.m. in New York Stock Exchange composite trading. They have dropped 26 percent since Forsee's ouster on Oct. 8.

Other Choices?

``Investors were hoping for a splashier announcement and a more marquee name,'' such as Verizon Communications Inc. President Denny Strigl, said Craig Moffett, an analyst at Sanford C. Bernstein & Co. in New York. He expects the shares to perform in line with the market.

Hesse ``was always sort of perceived to be a fallback position,'' Moffett said. ``That's going to make it all the more difficult for him to win over the hearts and minds of investors.''

Tom Gerke, Embarq's general counsel, will serve as interim chief until a replacement is found. The Overland Park, Kansas- based company will focus on keeping and adding subscribers and should be able to choose a new CEO within the next year, he said in an interview.

James Hance, a senior adviser to the Carlyle Group, remains Sprint's chairman, the company said today in a statement.

Communications Background

Hesse had been chairman and CEO at Embarq since its spinoff from Sprint in May 2006. He led the unit for a year before that and spent 23 years at AT&T, where he ran the wireless services group from 1997 to 2000. Sprint said he boosted sales at triple the rate of rivals.

In his previous jobs, Hesse tried packaging services in new ways to lure customers. He championed a plan in the late 1990s for AT&T to offer a single price for calls made on telephone lines or mobile phones. At Embarq, Hesse was developing a strategy to integrate home-phone calling with wireless service.

Embarq's profit fell 1.9 percent to $157 million last quarter. Earnings have shrunk at a slower pace in the past three periods after Embarq introduced packages with wireless service, television and Internet, and stepped up marketing efforts.

Hesse ``has strong operations experience so he's a good fit for what they need,'' Ben Abramovitz, an ICAP analyst in New York, said in an interview. He has a neutral rating on the shares.

Fleeing Customers

Forsee, 57, failed to quickly integrate operations from Nextel Communications, bought in 2005, and customers fled amid service disruptions. Sprint ended September with 41.4 million contract subscribers, trailing AT&T and Verizon Wireless.

The rate of contract subscriber turnover at Sprint, or churn, was 2.3 percent last quarter, compared with an average of 2.1 percent in the previous 10 quarters, according to data compiled by Bloomberg.

Sprint had a tougher time than officials anticipated integrating the $36 billion purchase of Nextel and began firing 5,000 workers in January to weather customer defections.

Rivals have fared better. AT&T, based in San Antonio, won subscribers with new handsets such as Apple Inc.'s iPhone, which doubles as an iPod music player. Sprint countered with its own music-playing phones, such as High Tech Computer Corp.'s Touch and Samsung Electronics Co.'s UpStage.

Verizon Wireless, jointly owned by Verizon Communications and Vodafone Group Plc, added 1.7 million contract subscribers last quarter, speeding up its Internet access and selling new handsets to lure customers away from Sprint.

To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net; Amy Thomson in New York at athomson6@bloomberg.net

Last Updated: December 18, 2007 16:23 EST