Affiliate Sues Sprint PCS

[ComicalMoodyDan]

Affiliate Sues Sprint PCS
By Sue Marek
July 14, 2003
news@2 direct


Sprint's antagonistic relationship with at least one of its affiliates just degenerated to a new low. Late Friday, affiliate US Unwired filed a lawsuit against Sprint Corp., accusing the company of breach of fiduciary duty and fraud.

Specifically, the complaint says Sprint pressured and manipulated US Unwired into changing its affiliate status from a Type III (which allows the affiliate to control all business functions including billing, collections and customer service), to a Type II affiliate (which allows Sprint to provide those functions and then compensates the company for its services), thus giving the telecom heavyweight control over US Unwired's OSS and back-office systems. By having control over these functions, US Unwired claims it became dependent on Sprint for its daily accounting and business functions.

According to US Unwired, Sprint was able to manipulate the affiliate into changing its affiliate deal by failing to provide US Unwired with the necessary OSS connection information so the affiliate could launch Wireless Web services in 1999 along with Sprint and its other affiliates. US Unwired says that after months of waiting for the OSS connectivity information, Sprint informed the company it would have to pay between $16.4 million to $20 million to Sprint to integrate its systems, making it cost prohibitive for US Unwired to remain a Type III affiliate.

And once US Unwired's affiliate designation changed, the company says things went downhill. According to the filing, when Sprint got control of US Unwired's back office functions, the company proceeded to route different types of customer calls on US Unwired's network without the affiliate's consent and without providing proper compensation. The goal of these maneuvers, according to US Unwired, was so Sprint could ultimately acquire US Unwired's assets for 'pennies on the dollar.' The suit doesn't ask for a specific dollar amount but does request actual damages in addition to punitive damages.

Sprint denies the charges and says the suit is without merit. 'US Unwired's financial problems are due to its debt. The relationship between Sprint and US Unwired is a business relationship governed by contracts. Allegations made in the complaint such as those of fraud and racketeering are absurd. It is in everyone's best interest for US Unwired to focus on its debt issues,' said Dan Wilinsky, a Sprint spokesman.

Nevertheless, the suit does show how antagonistic Sprint's relationships with its affiliates have become. 'I'm surprised Sprint has allowed this situation to degenerate to the level of lawsuits,' says Ken Hyers, an analyst with In-Stat/MDR, a sister company of Wireless Week. 'This public washing of dirty laundry is pretty unusual in the industry.'

Affiliate Sues Sprint PCS

[northform]

The relationship between Sprint and its affiliates was always great while the economy was fine. Now that Sprint is tightening its belt and the affiliates are feeling the financial pinch, things have gotten a little less friendly. It happens when money gets tight. Sprint doesn't want to disappoint investors and the affiliates don't want to go out of business.