"4G" growth to impact Sprint Nextel exec bonuses

Sprint Nextel Corp., which posted improved, though still troubled fourth quarter results, is looking to more closely tie company performance with executive compensation.
In an 8-K filing with the Securities and Exchange Commission yesterday, Sprint Nextel noted that its executive compensation committee has set out new guidelines for 2010 executive bonuses tied to four operating metrics. Those metrics include first half 2010 performance of net service revenues (weighted at 45%), adjusted operating income before depreciation and amortization (weighted at 25%), postpaid customer churn (weighted at 20%) and subscriber additions to the carrier’s WiMAX-based “4G” service (weighted at 10%).
Executives mentioned in the filing as coming under the new plan include Sprint Nextel CEO Dan Hesse, CFO Robert Brust, President of Strategy and Corporate Initiatives Keith Cowan and President of Network Operations and Wholesale Steve Elfman. If performance targets are met, Hesse could receive a bonus of at least 170% of his base salary or just over $2 million, Brust’s would be at least 130% of his base salary or $1.3 million, Cowan’s would be at least 125% of his base salary or just over $906,000, and Elfman’s would be at least 125% of his base salary or $812,500.
The compensation committee said it has not yet set guidelines for the second half of the year.
While the exact metric targets were not in the filing, Sprint Nextel’s Q4 2009 results showed the carrier is still trying to find its operational footing. The carrier’s net wireless service revenues were down 5% year-over-year during the quarter and more than 8% for the year; adjusted OIBDA was down 21% for the quarter and down 23% for the year; postpaid churn had improved slightly for the quarter from 2.16% in 2008 to 2.11% in 2009 and from 2.18% for all of 2008 to 2.15% for all of 2009. Sprint Nextel did not report customer additions for its WiMAX service, though Clearwire Corp., which is operating the WiMAX network Sprint Nextel is using for its “4G” service said it had 46,000 wholesale customers on its network at the end of 2009.
In addition to the 2010 bonus layout, the filing also noted that the compensation committee approved a $300,000 bonus for Elfman for his leadership in the carrier’s network outsourcing agreement with Ericsson.