iPhone Effect: Sprint’s Hesse To Forego Millions

Following reported criticism from shareholders over costs related to the iPhone, Sprint Nextel Corp. Chief Executive Dan Hesse agreed to lower his compensation.

“These voluntary actions regarding my personal compensation, which total $3,250,830, will eliminate any benefit for me to the discretionary adjustment the Compensation Committee made earlier this year, and will set my 2012 incentive compensation target opportunities at my 2010 levels,” Hesse wrote in a letter to Sandra J. Price, Sprint’s senior vice president of human resources.

Hesse decided to make the adjustments after hearing from unhappy shareholders following Sprint’s decision last year to not count the iPhone’s effect when figuring bonuses for certain employees tied to the company’s performance, The Kansas City Star reported.

Sprint’s sale of the iPhone has helped it grow its customer base, but it’s an expensive undertaking. The company has a minimum commitment to buy $15.5 billion in Phones over four years and said it would pay Apple subsidies that are 40 percent higher, or $200 more per device, than what it pays for other phones, Reuters reported last year. Sprint sold about 1.5 million iPhones in the first quarter, with 44 percent of the devices going to new customers. The company attributed a roughly $500 million increase in its wireless equipment net subsidy ($1.6 billion) primarily to the iPhone launch last year.

In the letter to Price, filed with the Securities and Exchange Commission, Hesse said he didn’t want “to penalize Sprint employees for the company’s investment with Apple” so he would give up a discretionary adjustment to his compensation. For 2011, Hesse received $11.9 million plus stock awards worth $3.2 million and non-equity incentive plan compensation of $4.8 million, according to Bloomberg News.