A not-independent analyst might have skewed local media coverage of Sprint

In June, when Sprint introduced the Instinct, its rival to the iPhone, industry analyst Jeff Kagan
gave the launch a good review.

Quoted in a June 19 Kansas City Star story by business reporter Jason Gertzen, Kagan said the launch was a sign that the company had started managing its business better and positioning itself to compete. Sprint, Kagan said, had done “another great job pricing their new flagship Instinct phone.”
The glowing review shouldn’t have been much of a surprise — that’s what Sprint has paid him to do.

Kagan’s work as a telecom industry analyst was the subject of a May 2006 New York Post story headlined “Paid-For Pundit — Analyst Cashes in on Telecom Talk.” According to the Post, stories like the June 19 Star article have appeared regularly without mentioning that Kagan isn’t exactly an independent analyst. Instead, the Post reported, Kagan was being paid by several telecommunications companies to give feedback to the press. The Post went on to note that both Sprint and Verizon were clients of Kagan’s and that “a typical arrangement is for the company to pay $10,000 a month in exchange for his services.”

The story also quoted Kagan as saying, in reference to the telecom companies he publicly evaluates, “If they don’t have me on retainer, I will talk about them. But my comments won’t be that deep.”

The Post’s revelation didn’t hurt Kagan’s standing as a go-to source for Sprint business stories in Kansas City. Since October 2006, Kagan has been quoted at least 21 times in stories on the telecommunications industry, more than half appearing in the Star under Gertzen’s byline. He also has been quoted in Associated Press stories, in the St. Louis Post-Dispatch and in the Kansas City Business Journal.

Kagan is generally positive in these stories, in which he is most often referred to as a wireless-industry analyst or a telecommunications-industry analyst. Commenting on Sprint’s firing of three senior executives in a story on January 25, he told the Star, “[The moves were] painful, but they may be just be what the company needs.” Asked about the announcement that Sprint would cut more jobs, Kagan said in Gertzen’s May 13 story, “There is no surprise here. The question is: What will Sprint Nextel look like a year from now?”

He was similarly upbeat in an October 5, 2007, Kansas City Business Journal story regarding the search for a new CEO following Gary Forsee’s departure. “The things I see Sprint doing are preparing the company for the longer term, transitioning the company for growth going forward,” Kagan said.

Gertzen tells The Pitch he began contacting Kagan for input because Kagan was a well-known name in the telecom industry.

“I’m familiar that he’s widely quoted,” Gertzen says. “A lot of analysts will have relationships with companies they talk about. I’m usually pretty careful when I chose to quote him and try to learn about potential conflicts he might have.”

Gertzen admits that his caution did not extend to asking Kagan about financial ties with Sprint or questioning the company about whether it pays Kagan for his commentary. “I’m not sure if I asked him [Kagan] specifically for every story, no,” he says. “I haven’t asked Sprint.”

Gertzen was unconcerned that Kagan’s opinions might be colored by his relationship with Sprint. “I have to make an assessment about what he’s saying and evaluate any ties that he has the companies, and if it’s an informed opinion about Sprint and the industry.”

Business Journal editor Brian Kaberline declined to discuss his paper’s use of Kagan specifically. “I’m not going to call and interview you about how you report a particular story and how you ask a particular question. Once you get into that, it’s so easy to pick apart flaws on anything — ‘Why did you do that, Why did you ask that?’ Realistically, you’re always going to try and find the best sources and try to find a range of sources. You recognize people are going to have points of view and biases. Hopefully, you get enough you can get an accurate picture.”

Speaking from his Atlanta office, Kagan now tells The Pitch that the Post story was inaccurate — not because the Post’s facts about his fees were wrong but because he was mentally unable to answer questions.

“I was called for that story right after I had a stroke,” Kagan says. “That was a weird time for me, and I don’t remember what the piece talked about, exactly. I didn’t tell him [the reporter] at the time that I had had a stroke because I didn’t want the whole world to know it, but apparently when he was asking me questions, I didn’t answer him well enough.”

Kagan says he never pursued a correction or a retraction.

He declines to discuss his financial relationship with Sprint, but regarding telecommunication businesses in general, he says, “I work with everybody and have meetings with everybody. If reporters call and want a comment, you answer them. It helps with your profile.”

Joe Mandacina, Sprint’s director of analyst relations and executive communications, also refuses to discuss whether Kagan has been on the company’s payroll. “Over the years, we have had him consult for a variety of different projects,” Mandacina tells The Pitch. “We engaged a lot of different firms and analysts over the years. But I’m not going to answer that question specifically.”

Mandacina says reporters have never asked his opinion of Kagan as an analyst or questioned him on any financial ties between Kagan and Sprint.

But Kagan is apparently happy with the direction Sprint is headed. Asked if he can recall any poor decisions the company has made in the past few years, he is unable to do so — even though the company lost a reported 1.1 million subscribers and $505 million in the first three months of 2008, is cutting thousands of employees and closing stores. “No. Nothing comes to mind,” Kagan tells The Pitch.

“Look, I don’t see anything wrong with being quoted as an independent consultant,” he says. “Why not? How else do you make money? I wouldn’t do it if I thought it was wrong, and I wouldn’t do it if I was the only one doing it. I don’t need trouble.”

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