Optical/IP Networks

Sprint Gets a 'Restricted' CEO

After a month and a half of discussions, restraining orders, and court hearings, BellSouth Corp. (NYSE: BLS) vice chairman of operations Gary Forsee was finally free to become CEO of Sprint Corp. (NYSE: FON) (see Judge: Forsee Can Join Sprint).

Sprint’s board named Forsee, 52, as CEO after arbitrator William Webster ruled last night that he could leave Sprint's competitor to take the job (see Sprint Names Forsee CEO).

But the decision puts him in a peculiar new role -- as the CEO-who-can't-do-lots-of-stuff. Webster placed significant restrictions on Forsee’s activities during the first 12 months of his tenure with the carrier. Sprint’s new CEO will, among other things, be barred from participating in: merger-and-acquisition negotiations; plans related to competition with either BellSouth or Cingular Wireless; and recruitment of BellSouth employees.

The deal had some analysts scratching their heads.

“In a perfect world, he could come riding in on his white horse and save the day for [Sprint],” says Jeff Kagan, an independent analyst based in Georgia. “[But] the restrictions are going to make it very difficult for a CEO to function… They entail so many areas that are going to be critical to Sprint’s future this year.”

Forsee, who was long viewed as a natural heir to Duane Akerman’s BellSouth throne, was invited to join Sprint last month after that company decided to push out several of its top executives, including CEO William T. Esrey, who had participated in a dodgy tax-shelter during the high-flying bubble days (see Sprint Faces Management Muddle and Sprint's Fun With the IRS). Esrey will continue in his role as chairman of Sprint during a transition period.

“We’re pleased that Gary Forsee is now free to join Sprint,” Sprint spokesman Mark Bonavia says.

Webster issued his ruling after concluding three days of hearings last week on whether such a move would violate the confidentiality clause of Forsee’s BellSouth contract.

The ruling is bad news for BellSouth, which has desperately been trying to block Forsee from moving to Sprint, which competes head to head with the Bell’s long-distance business, as well as with its Cingular Wireless joint venture with SBC Communications Inc. (NYSE: SBC). BellSouth has voiced fears that Forsee will divulge intimate details of its trade secrets, which he has been privy to, including strategies to win back long-distance customers from Sprint.

Forsee had worked in Sprint’s long-distance and wireless divisions between 1989 and 1999, and until today ran BellSouth’s domestic business. He was also chairman of the company’s Cingular Wireless joint venture with SBC Communications Inc. (NYSE: SBC).

Webster’s ruling only pertained to the confidentiality clause of Forsee’s BellSouth contract. Fulton County Superior Court Judge Stephanie B. Manis ruled last month that the non-compete agreements Forsee has signed with BellSouth were too broad and vacated a provision that prevented him from joining a BellSouth competitor for the first 18 months after leaving the company. BellSouth has appealed this ruling to the Georgia Supreme Court, but a hearing may still be months away, observers say (see BellSouth's View of Foresee Flap).

Despite the restrictions placed on him, the ruling should allow Forsee to breathe a sigh of relief. If Webster had ruled purely in BellSouth’s favor, and blocked his move to Sprint, he would certainly have found himself among the industry’s many unemployed. Although he’s remained on the BellSouth payroll throughout the dispute, industry observers agree that there is no way he would have been welcomed back to the company.

"It is a pleasure to be a part of this great company again,” Forsee said in a statement last night. “Sprint has an impressive heritage of innovation and customer service. When you combine that with the company’s strong financial position and enviable set of assets, you quickly realize the incredible potential Sprint possesses.”

Some observers, however, question why Forsee ever considered making the move in the first place. “Why he’d want to do that, I don’t know,” says Network Conceptions LLC analyst Phil Jacobson. “[Sprint is] not number one or even number two in anything they do. That’s a very difficult position to be in.”

— Eugénie Larson, Reporter, Light Reading

COMMENTS Add Comment
optical 12/5/2012 | 12:24:40 AM
re: Sprint Gets a 'Restricted' CEO Why does LR continue to write that Esrey is leaving due to some tax issue? My understanding it is strictly for health reasons and that this tax issue may be neat to write about, but there's no issue for Mr. Esrey in terms of him doing something illegal.
sealink 12/5/2012 | 12:24:21 AM
re: Sprint Gets a 'Restricted' CEO The deal here is that Sprint does lots of things, everything from cell phones to service providing. So a well-rounded CEO is much better than a restricted one like the article states. Not being able to be friends with your competition can hurt your company especially at the CEO level. But being against the RBOC's is suicide for Sprint.
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