Nextel Communications Inc.’s youth-oriented Boost Mobile L.L.C. subsidiary lost its top executive last week as Peter Adderton, former chief executive officer and founder, said he was leaving the venture due to disagreements with Nextel over strategy, direction and the failure of Nextel to keep promises made to him.
Adderton claimed he told Nextel CEO Tim Donahue in a meeting Nov. 23 that he believes “the company and several senior officers have failed to live up to promises made when Nextel completed its purchase of Boost this past August.”
“When Nextel bought our company, it was made clear to me that Boost would continue to operate independently and that our job was to build a brand that could dominate the youth wireless market,” Adderton said in a statement. “Instead, they’re trying to turn us into Nextel in jeans. Every day, Nextel reins us in a little more and makes us increasingly corporate. That’s completely incompatible with what we’re trying to accomplish.”
Adderton, who was not available last week for comment, added he believed Nextel’s failure to roll out the Boost brand nationwide and decisions made by Nextel’s management to impose the carrier’s corporate culture on Boost were taking the company in the wrong direction.
Nextel, which bought a controlling interest in Boost in August 2002 followed by taking complete ownership earlier this year, noted Adderton’s departure would not affect the carrier’s plans for Boost, which include rolling out service to additional markets next year.
“There was different perspectives on strategy going forward,” said Nextel spokeswoman Audrey Schaefer. “We wish Peter the best.”
Schaefer noted that Nextel maintains control of Boost’s U.S. operations, which at the end of September served 245,000 subscribers including 102,000 customers the venture added during the third quarter of this year. According to Boost’s Web site, Don Girskis, former Nextel vice president, is now listed as the chief operating officer and top executive at the company.
Industry observers do not expect Adderton’s departure to have a significant impact on Nextel’s plans for Boost, noting control of the venture has not changed.
“It never was an independent company,” said Andrew Cole, global wireless practice leader at industry consulting firm Adventis Corp. “If [Adderton] felt it was, he was mistaken.”
Since the prepaid offering launched in California and Nevada last fall using Nextel’s iDEN network and Motorola Inc. handsets, Boost has been aggressively marketing its services to the youth market through unique advertising and sponsorship of extreme athletes and events. In addition, Boost, which describes itself as a “lifestyle-based telecommunications company that focuses solely on developing and distributing communications products for the youth market,” has also signed content and marketing partnerships with a number of youth-oriented brands including Quicksilver and Roxy.
The venture garnered acclaim from analysts who applauded Nextel’s proactive stance in trying to market services to an under-penetrated youth market, as well as the carrier’s attempt to broaden its predominately business-centric customer base. Others noted the venture was a strong reaction to the success Sprint PCS is finding with its Virgin Mobile L.L.C. mobile virtual network operator offering that has used quirky advertising and youth-oriented content partnerships to sign up more than 1 million subscribers since its launch in mid-2002.
Reviews were mixed on Nextel’s conservative growth plans for Boost, which the carrier said were an attempt to mitigate the common prepaid issues of higher customer churn and lower average revenue per user compared with its typical industry-leading metrics.
Nextel’s Donahue has repeatedly said the carrier would monitor Boost’s growth and effect on its bottom line and would move ahead with the venture only if it proved beneficial to shareholders.
Adderton hinted that he might not be finished with Boost, noting it remains an independent company in Australia and New Zealand, where it was founded in 1999, and he remains its CEO and major shareholder.
“To build a youth-oriented brand, you have to be immersed in youth culture,” Adderton said. “Since Nextel doesn’t get that and doesn’t want to operate that way, I just want to take Boost back and run it myself in the way I know will work.”
