Sprint’s dreadful customer service is CEO Hesse’s No. 1 priority

February 28, 2008, 7:21 PM UTC

By Michal Lev-Ram

Sprint chief executive Dan Hesse faced investors for the first time Thursday as the company delivered a slew of bad news, including a fourth-quarter loss of $29.5 billion and a continued decline in subscriber numbers.

Hesse, a wireless veteran, was brought in last December to replace ousted CEO Gary Forsee. Since then he has made several cost-cutting changes at the company — including laying off about 4,000 employees and closing 125 retail locations.

But Hesse is first to admit that fixing Sprint’s (S) woes will take much more. And the thing that needs fixing most is the Sprint’s reputation for dreadful customer service.

“The number one priority is improving customer service across all touch points, including retail stores, billing and customer care calls,” Hesse told Fortune.

That may be an understatement. In customer care surveys, Sprint regularly ranks lowest. It came in behind rivals Verizon Wireless (VZ), AT&T (T), T-Mobile and Alltel on a recent customer service performance study by J.D. Power and Associates. Bad customer relations has contributed to its high level of “churn,” the rate at which customers defect to other carriers. Sprint says it lost nearly 700,000 subscribers in the fourth quarter alone.

“Not only are we not attracting enough new customers, but our existing customers are leaving us at too big a rate — that’s why the customer service issue is highest on our list,” Hesse said Thursday after a conference call with analysts.

To that end, Hesse says he has changed the way the company measures its call centers’ performance. Instead of focusing on “handle time” — how quickly a customer’s issue is resolved — he says the focus is now on finding the right solution the first time a customer calls in, even if that means the call takes longer.

“Call resolution,” said Hesse, “is becoming the number one performance metric.”

Hesse is taking other measures to try to stop customers from fleeing. Earlier that day he announced the launch of Sprint’s new $100-a-month unlimited calling and data plan. The other major carriers launched their own unlimited calling plans last week, but unlike Sprint theirs did not include services like “all-you-can-eat” mobile TV, Web browsing and e-mail.

Hesse says his number two priority is re-defining Sprint’s brand, which he hopes to build around the company’s data services and the high-speed broadband network that enables them.

But some in the industry are calling for even more dramatic bigger changes, such as breaking up the company and selling off its pricey WiMax project, a next-generation wireless network into which the company has poured billions of dollars.

Hesse said he is still evaluating all aspects of the company’s operations, but that any turnaround is unlikely to happen for many quarters.