The No. 3 U.S. wireless carrier acquires another affiliate upset over Sprint’s Nextel deal
Sprint Nextel Corp. has agreed to buy wireless affiliate UbiquiTel Inc. for almost $1 billion in cash and assume roughly $300 million in UbiquiTel’s debt.
Conshohocken, Pennsylvania-based UbiquiTel sells Sprint’s service under the Sprint brand name to subscribers in small markets in the West and Midwest, with a total of about 600,000 subscribers.
Broader Dissent
In July 2005, UbiquiTel sued Sprint Nextel, after Sprint bought Nextel for nearly $36 billion, alleging the deal violated its exclusivity deal with Sprint.
On Aug. 2, the companies agreed to terms that called for Sprint Nextel not to market its wireless service in UbiquiTel’s territories through Jan. 1. That agreement was intended to enable the companies to continue doing business until their pending litigation went before a judge, Sprint Nextel spokesman David Gunasegaram said in a statement.
The massive Sprint Nextel deal also caused unrest with several of Sprint’s other affiliate providers. The affiliates have been upset that Nextel’s additional service would compete directly with their own services and deals with Sprint.
The proposed transaction is subject to shareholder and regulatory approvals. The companies expect the deal to close in the second quarter.
The proposal stipulates that the companies will seek an immediate stay of litigation pending in the Delaware Court of Chancery, Sprint Nextel said in the release. Final resolution of the litigation would take effect when the deal closes.
UbiquiTel serves about 452,000 wireless customers, who would become direct subscribers of Sprint Nextel if the transaction goes through. The deal would extend Sprint Nextel’s direct service territory to an additional 8.3 million people in nine states, the company said.
UbiquiTel is based in Conshohocken, Pa. It employs about 425 people and had revenue of $422.7 million in 2005.
The UbiquiTel acquisition leaves Sprint Nextel with four remaining independent Sprint affiliates, representing an estimated 775,000 subscribers, Bank of America Corp. analyst David Barden said in a research note.
Barden estimated that it would cost Sprint Nextel $1.4 billion to buy the remaining affiliates. They are Swiftel, Northern PCS, iPCS Inc. and Shenandoah PCS. On April 14, Shenandoah PCS parent Shenandoah Telecommunications Co. said it was putting the affiliate up for sale.
In the past 12 months, following a series of suits, Sprint Nextel has bought Sprint-branded affiliates Alamosa Holdings Inc., US Unwired Inc., IWO Holdings, Gulf Coast Wireless LP and Enterprise Communications Partnership in deals with a combined price tag of $6.5 billion.
Sprint Nextel has corporate headquarters in Reston, Va., and operational headquarters in Overland Park.
The merger of Sprint Corp. and Nextel Communications Inc. necessitated the acquisitions because the affiliates’ original deals called for Sprint not to compete head to head in affiliate territory, which it would have with Nextel in the fold.
Upon the completion of the UbiquiTel transaction, Sprint Nextel will have paid nearly $6 billion to purchase disgruntled affiliates.
As part of the purchase, UbiquiTel will end the company’s litigation against Sprint Nextel.
Sprint Nextel is the third-largest wireless provider in the U.S., and the company needs its affiliate networks to keep its subscriber count high.