UPDATE: Sprint Chief Cuts Pay After Shareholder Backlash

Sprint Nextel Corp. (S) Chief Executive Dan Hesse agreed to cut $3.25 million from his compensation package after shareholders complained that his pay didn't account for the hefty upfront expense of carrying the Apple Inc. (AAPL) iPhone.

The company had boosted Hesse's 2011 compensation by 31% to $11.9 million, in part because the formula used to determine his compensation hadn't factored in the cost of buying millions of iPhones, which carry some of the highest subsidies in the industry. Hesse, in a letter filed with the Securities and Exchange Commission Friday, said he was voluntarily cutting some short- and long-term bonuses as well as some stock awards.

Sprint agreed to buy $15.5 billion in iPhones over the next few years and said it wouldn't make a profit on the deal until 2015. The carrier lost 98,000 lucrative contract customers last year--while rivals AT&T Inc. (T) and Verizon Wireless padded their user rolls--in part because Sprint didn't carry the popular smartphone until 2011's final three months.

The action by Hesse is the latest sign carriers may be fed up with the high price of the iPhone. Sprint, AT&T and Verizon Wireless have been heavily promoting alternatives to the roughly $600 handset, such as devices from Samsung Electronics Co. (SSNHY, 005930.SE), Nokia Corp. (NOK, NOK1V.HE) and HTC Corp. (2498.TW).

"I do not want, nor does our compensation committee want, to penalize Sprint employees for the company's investment with Apple," said Hesse. Other officers who benefited from overlooking the iPhone's impact, such as finance chief Joe Euteneuer, have no plans to take similar pay reductions, said a Sprint spokesman, declining to comment further.

Hesse said he agreed to have his paychecks lowered to account for the reduction in his bonus to levels from 2010. He is cutting his salary by about $346,000 and is forgoing roughly $545,000 in future pay related to the company's performance last year.

Sprint Chairman James Hance said in an e-mailed statement that Hesse had the "full support" of the board. "We applaud Dan for his willingness to sacrifice personal compensation," Hance said. The board previously approved the compensation packages that didn't account for the iPhone.

At Sprint's annual meeting later this month, shareholders will consider a proposal from the AFL-CIO that would stretch the evaluation period for bonuses to three years from one.

Sprint has activated 3.3 million iPhones in the past two quarters, compared with 11.9 million at AT&T, and 7.5 million a Verizon Wireless, a joint venture of Verizon Communications Inc. (VZ) and Vodafone Group PLC (VOD).

-By Greg Bensinger, Dow Jones Newswires; 212-416-4676; greg.bensinger@dowjones.com