No Cultural Merger At Sprint Nextel

Sprint Nextel says phone companies keep prices high for access to high-capacity broadband lines to businesses. (Associated Press)
By Kim Hart
Washington Post Staff Writer
Saturday, November 24, 2007

More than two years after a $35 billion merger creating the nation's third-largest wireless company, Sprint Nextel remains a house divided.

Two sharply different corporate cultures have resulted in clashes in everything from advertising strategy to cellphone technologies, preventing Sprint Nextel from becoming the merger of equals envisioned.

The discord was on display almost immediately. At a Nextel managers meeting held just after the merger was announced in December 2004, chief executive Tim Donahue revved up the crowd with a pep-rally-style speech. Donahue, dressed in a sweater vest and khakis, drew cheers by chanting, "Let's go stick it to Verizon!"

He then introduced a special guest -- Gary Forsee, Sprint's chief executive and the architect of the merger, who had flown in from Sprint's Kansas City headquarters. Forsee walked onto the stage wearing a suit and proceeded to outline his expectations for the combined company in a PowerPoint presentation. The room fell silent.

Since then, Sprint Nextel has taken steps to merge the two cultures, creating committees and hiring consultants. But despite those efforts, the tension between the two factions has risen, according to several current and former employees. Meanwhile the company's stock value continues to decline, and it continues to lose customers and market share to its larger rivals. It is also facing tough questions from Wall Street about its expensive gamble on WiMax, a wireless broadband system it is building.

Similar culture clashes have overshadowed other top-dollar mergers, such as MCI and WorldCom and AOL and Time Warner. At Sprint Nextel, the struggle to blend the companies -- from its executive teams to billing systems -- ultimately forced Forsee to step down last month.

"It was a really painful process early on -- we had to make very difficult decisions, and some had unexpected consequences," said Paul Saleh, the interim chief executive and financial chief. "But I see us emerging from that as a stronger, more unified company."

Initially, the companies' disparate yet complimentary assets became a persuasive argument for the merger. Sprint, a century-old long-distance and local phone company, was turning its focus to consumer wireless services and wanted to inject Nextel's scrappy strategy into its business model. For Nextel, which was close to maxing out its network and clientele of business users, getting access to Sprint's larger customer base seemed like a logical move.

But it didn't take long for friction to surface, employees at both companies said. At the heart of the tension was a sense of mistrust on both sides, they said. Some Nextel employees say they feel the aggressive, entrepreneurial style that spurred its early growth has been stamped out by Sprint's more bureaucratic approach. Some of the Sprint folks say they feel deceived by Nextel's deteriorating network, the source of the company's deepest customer losses.

As longtime Nextel employees with the expertise to repair the network took lucrative exit packages, Sprint workers said they felt abandoned and blamed the ailing network for the company's financial woes. Nextel employees, meanwhile, felt their brand and technology had been unfairly dismantled.

Current and former employees and executives requested anonymity because they still have business relationships with Sprint Nextel.

Conflicts continued after the merger was finalized in August 2005. Executives from both Sprint and Nextel held confidential meetings to hash out internal disputes over, for example, the organization of sales teams and problems with billing systems.


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