Sprint pays $131M to settle class-action lawsuit over Nextel merger claims

Sprint (NYSE: S) agreed to pay a $131 million settlement to end a class-action lawsuit brought by investors, who had argued that the carrier fraudulently inflated its stock and bond prices by hiding the health of the company following its 2005 merger with Nextel.

According to documents made public in federal court in Wichita, Kan., the settlement will resolve claims that former Sprint CEO Gary Forsee and other officials illegally inflated the company's stock and bond prices between October 2006 and February 2008. The lawsuit was first filed against Sprint in May 2009.

As Reuters notes, the investors said the Sprint executives falsely claimed the carrier was getting billions of dollars of synergies from the merger and improving its subscriber base by tightening credit standards. However, the lawsuit claimed that Sprint was facing tremendous difficulties integrating Nextel's iDEN network with its own CDMA network, and was losing hundreds of thousands of subscribers. Sprint ultimately made a $29.7 billion goodwill writedown in February 2008 on the $36 billion merger, which has gone down as one of the worst corporate mergers in history.

Sprint spokeswoman Stephanie Vinge told Reuters that the carrier settled to avoid the cost and distraction of litigation. "Sprint has and will continue to operate in complete adherence with all federal securities laws," she said.

The lead plaintiffs were the United Steelworkers' Pace Industry Union-Management Pension Fund, Skandia Life Insurance and the West Virginia Investment Management Board. The plaintiffs had been aiming for $1.79 billion in damages. The settlement, which was reached in mediation with Sprint, must now be approved by a judge.

Sprint has been struggling to get back to postpaid subscriber growth and has cut its prices since Marcelo Claure took over from Dan Hesse as CEO last August. Hesse replaced Foresee in late 2007 and eventually shut down the Nextel network and dropped Nextel from the corporate name. 

Lately, Sprint has focused on expanding its 2.5 GHz and 800 MHz LTE network footprints and is running a promotion that will cut customers' service bills in half if they move from Verizon Wireless (NYSE: VZ) or AT&T Mobility (NYSE: T) and purchase a new Sprint phone.

For more:
- see this Reuters article
- see this Bloomberg article
- see this Kansas City Star article

Related Articles:
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Sprint hits Spark buildout target for 2014, will reportedly focus on 2.5 GHz small cells next year
Sprint to cut 2,000 jobs, postpaid subscriber losses slow
Sprint hit with another class-action lawsuit

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