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New Sprint Local Chief Promises Spin-off To Be Competitive

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RESEARCH TRIANGLE PARK, N.C. — Dan Hesse, the designated chief executive officer of Sprint's local telecom division, plans on spending a great deal of time in North Carolina.

As Sprint Nextel prepares to spin off the local group sometime early in 2006, Hesse is already making the rounds in local markets.

"North Carolina is No. 2 in terms of most customers, so it's of extreme importance," Hesse told WRAL Local Tech Wire during a telephone interview. "Did you know that the second largest exchange we have is Fayetteville? It's second only to Las Vegas. That gives an indication on how important North Carolina is and why I will be visiting the state on a fairly regular basis."

As a result of the Sprint Nextel merger earlier this year, the combined entity will focus on wireless efforts. The local telecom group, which provides landline services in 18 states, is to be spun off as a separate company.

And it won't be small. According to Sprint, the still as yet unnamed spin-off will be a Fortune 300 company. It also will rank as the largest independent phone company beyond BellSouth and the other regional Bell operating companies.

Hesse took time during a stop in Charlottesville to discuss with LTW what the spin-off means for the Sprint group and its customers.

"I am excited about this," said Hesse, who was named to the CEO role shortly after Sprint said it would spin off the local division. "This is going to be a good move for Sprint to separate us. It's good for us, our tradition and our customers. We can focus on the unique markets we serve. We will be able to put packages and bundles of services for consumers and businesses on a very specific basis."

Sprint's largest local telecom market is Florida, followed by the Carolinas. Sprint operates its Carolina headquarters near Wake Forest. Many of its markets in those 18 states are in rural areas.

"Sprint Nextel will focus on every corner of 50 states and in particular the major metro areas for its wireless services," Hesse said. "We'll be able to provide solutions to the markets that we serve, many of which are medium size cities and rural communities."

Hesse also vowed that the Sprint local group will be "aggressive".

"Aggressive, bold, innovative in communications. That's what we will be," he said.

Competition requires as much, he added.

"The landscape is changing very rapidly. We have to compete not only with the wireless carriers, but now many people believe the landline phone is a luxury. The consumers have flipped.

"They also can go to other companies such as the cable TV firms for their phone service, so we have to be very innovative. That one line or more lines into homes and offices has to be made indispensable, and we have to provide high-speed data, Internet, video and data to meet the lifestyle and business needs of our customers.

"We will be integrating those offerings across landlines to make them indispensable."

The local group continues to invest in making more high-speed digital subscriber line services available across its footprint, Hesse added. "We'll be offering download speeds up to 5 megabits per second," he said. "That's very fast."

One challenge to the local group after the spin-off is the fact it will assume some $7.25 billion of Sprint debt.

"No, we're not worried," Hesse said. "The rating agencies have told us that based upon our cash flow and our value as a company that they likely will give us an investment grade rating, which is very strong. That means lower interest rates."

Once the spin-off occurs, Hesse said that no one should expect the "help wanted" signs to go up.

"That could very well happen over time," he said if the new company would be hiring. "The first thing we have to do is to grow the business.

"It has been flat. It has been under competitive attack," he added. "We are working very hard to have innovative new offers. In the markets we are in, when we start moving revenues northward then we will be in position to add people."

The Sprint local group will employ some 20,000 people.

One of the challenges to be settled is what the new entity will be called. Hesse offered no clues as to what the name might be but said progress is being made.

"The list is narrowing down," he said. "We'll have a name selected in the middle of the first quarter."

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