Sprint Nextel is acquiring its affiliate iPCS for $831 million in a deal that will settle all litigation between the two companies. The two have been squabbling for years over territorial exclusivity rights, arguments that spanned CDMA, iDEN and mobile WiMAX offerings. Sprint said the acquisition includes assuming $405 million of net debt, and will result in synergies of $30 million per year. Through the deal, Sprint will add more than 700,000 direct customers and 270,000 wholesale customers to its customer base of 49 million people.
As of June, iPCS' spectrum licenses covered around 15.1 million people, and its network covered 12.6 million people.
The deal is the latest in a long string of purchases for Sprint, which kicked things off in a big way in 2005 with the purchase of Nextel for around $35 billion. Since then the carrier has snapped up a range of its affiliates including US Unwired (for $1.3 billion in 2005), Alamosa Holdings (for $3.4 billion in cash in 2005), Nextel Partners (for $6.5 billion in 2005), UbiquiTel (for $1.3 billion in 2006) and other, smaller companies and affiliates. The latest? Sprint announced in July a plan to buy Virgin Mobile USA for $483 million.
Under the terms of its proposed iPCS acquisition, Sprint will acquire all of iPCS' outstanding common shares for $24 per share, which represents a 34 percent premium of iPCS' closing price of $17.88 on Oct. 16. The deal is subject to regulatory approval and is expected to close either in the fourth quarter or early 2010.
Stock for iPCS was up a whopping 33 percent on the news, to around $23.83 per share. Sprint's stock meanwhile remained relatively unchanged at around $3.47 per share.
The acquisition marks a potential end to years of vicious litigation between Sprint and iPCS. Indeed, the transaction, if confirmed, may allow Sprint to retain the iDEN operations in parts of Illinois, Iowa, Michigan and Nebraska it was ordered to divest. In early February, the Circuit Court of Cook County, Ill., ruled that Sprint had violated agreements with iPCS by operating its iDEN networks in territory in which iPCS had affiliate exclusivity rights. The court ordered Sprint stop owning, operating and managing the offending portion of the Nextel network by Jan. 25, 2010. Now, Sprint said it will now no longer be divesting the operations.
Sprint spokesman Scott Sloat told FierceWireless that while settling the litigation was a factor in the deal, the acquisition also will bring Sprint synergies and improve its free cash flow in 2010.
"While it certainly was a consideration, the transaction also is a good move financially and strategically," he said. "Sprint Nextel will be acquiring a growing CDMA wireless business that fills in a piece of our existing national wireless network."
Sloat also said that Sprint continues to "value our relationship with the remaining PCS affiliates that provide service under the Sprint brand."
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