Sprint CEO to Return $3.25 Million in Pay Tied to Iphone

Sprint Nextel Corp. (S) 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. (AAPL)’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 today.

“I do not want, nor does our Compensation Committee want, to penalize 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 today’s 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 Inc. (T) and Verizon Wireless. The company, the third-biggest wireless carrier in the U.S., reported a wider loss in the first quarter amid contract user defections and has posted annual losses for the past five years.

“Dan enjoys the full support of our board of directors and we appreciate the leadership he has demonstrated as he continues to guide the company through a turnaround in a difficult competitive environment,” Sprint Chairman James H. Hance said in the statement.

Stock Awards

For 2011, Hesse had received $11.9 million, a 31 percent increase from a year earlier. He also got stock awards worth $3.2 million and non-equity incentive plan compensation of $4.8 million. Shares of Sprint declined 45 percent 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 percent to $59.88, from a year earlier, as users spent more on data plans.

In the first quarter, sales rose 5.1 percent 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.

Sprint’s shares dropped 4.8 percent to $2.36 in New York today, to give a 55 percent decline in the past year.

“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.

To contact the reporters on this story: Olga Kharif in Portland at okharif@bloomberg.net; Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.