Sprint May Get as Little as $5 Billion for Nextel

[TNDan21]

Sprint May Get as Little as $5 Billion for Nextel
By Chris Fournier

May 6 (Bloomberg) -- Sprint Nextel Corp. may get as little as $5 billion if Chief Executive Officer Dan Hesse opts to sell the Nextel business, a fraction of the $36 billion the wireless carrier paid in 2005, according to Cowen & Co.

Sprint may seek to spin off or sell the division, the Wall Street Journal said yesterday, citing people familiar with the matter. The company, which bought Nextel Communications Inc. three years ago, may sell Nextel for $5 billion to $8 billion, New York-based analyst Tom Watts said in a report today.

Shedding the unit, which cost Sprint almost $30 billion in writedowns last year, may make Sprint a more attractive acquisition target, according to analysts including Deutsche Bank's Greg Miller. The move also would help Hesse focus on Sprint's own network, which avoided the customer-service and quality complaints that plagued Nextel.

``You'd have one less network to deal with, so you'd reduce some of the complexity,'' Robert W. Baird & Co.'s William Power said today in an interview. The Houston-based analyst said there is less than a 50 percent chance Sprint will sell or spin off the assets because the board probably wants to give Hesse more time to revive the business.

Sprint, the third-biggest U.S. mobile-phone company, climbed 47 cents, or 5.4 percent, to $9.19 at 4 p.m. in New York Stock Exchange composite trading. The stock advanced 11 percent yesterday after the Journal's report. Sprint spokesman James Fisher said the company doesn't comment on speculation.

Miller, based in Greenwich, Connecticut, said the unit may be worth as much as $10 billion. Goldman Sachs Group Inc.'s Jason Armstrong in New York estimated the division's value at $8 billion to $10 billion.

Buyers?

The Journal reported yesterday that Deutsche Telekom AG is examining a takeover offer for Overland Park, Kansas-based Sprint. The purchase would make the German company's T-Mobile USA unit the largest mobile-phone company in the U.S.

Shedding Nextel first would remove ``much of the technology risk for an acquirer and increase the likelihood of regulatory approval,'' Miller said in a report yesterday. He advises holding on to Sprint shares.

About 25 percent of Nextel's subscribers fled in 2007, leaving the unit with about 13 million. Last month Hesse, who took over in December, said the network could still attract enough users to become profitable.

Sprint's purchase of Nextel isn't the only multibillion- dollar acquisition that has failed to yield the cost savings investors expected. In 2002, Time Warner Inc. wrote down the value of its purchase of America Online Inc. by $100 billion, about 80 percent of the price the company paid a year earlier.

Deutsche Telekom, Europe's biggest phone company, wrote down the value of mobile-phone assets by 21.4 billion euros ($33.2 billion) in 2002. The same year, Vivendi SA wrote down the value of entertainment, TV and music units by 18.4 billion euros.

Bloomberg.com: Worldwide

[Mobile Mike]

Wow. What a depreciation...

So apparently 13 million of Sprint's 53 million are on Nextel, which means real Sprint is at roughly 40 million (give or take from MVNO's and afilliates). T-Mobile is at about 30 million. If Sprint sheds Nextel before the DT takeover attempt, this means that T-Mobile and truSprint would be between 70 to 72 million in combined customers. This is about equal with AT&T. Does this sound right?

So they MIGHT be the largest carrier, but barely? Boy, all this merger/sell-off/spin-off stuff is exhausting to keep up with. I wonder where things will be on January 1, 2009...

[Jay2TheRescue]

Sprint took a huge writeoff there. Naturally I'd expect it to be worth less, because some Nextel customers have migrated to Sprint, but I'm thinking it probably wasn't worth it.

Last night I was reading some old threads from before the Sprextel merger and there were people saying that Cingular, AT&T, and Verizon would be crushed by the merger, and Sprint would be the dominant carrier in the US afterwards. Now 3 years later, Sprint's CSR's have a notorious reputation, they are hemmoraging customers and money, and Sprint has replaced T-Mobile as WA's whipping boy.

-Jay

[bobolito]

Originally Posted by TNDan21

Sprint May Get as Little as $5 Billion for Nextel

LMAOL!

...and this is what Gary Forsee thought was going to bring Sprint closer to AT&T and Verizon. LOL!

Originally Posted by Jay2TheRescue

....Last night I was reading some old threads from before the Sprextel merger and there were people saying that Cingular, AT&T, and Verizon would be crushed by the merger, and Sprint would be the dominant carrier in the US afterwards. Now 3 years later, Sprint's CSR's have a notorious reputation, they are hemmoraging customers and money, and Sprint has replaced T-Mobile as WA's whipping boy.

-Jay

I remember those comments, and I also remember laughing at them. I always thought this merger was ridiculous since Nextel has been nothing but a burden for Sprint.

[WumpusVA]

Originally Posted by Jay2TheRescue

Now 3 years later, Sprint's CSR's have a notorious reputation, they are hemmoraging customers and money, and Sprint has replaced T-Mobile as WA's whipping boy.

hahaha.... well put jay!

[walkguru]

Wirelessly posted (Walkguru's: Mozilla/4.0 (compatible; MSIE 6.0; Windows 98; PalmSource/Palm-D062; Blazer/4.5) 16;320x320)

what a shame wasting all that time and money. I sure do hope they can turn things around.

[larry]

The Nextel acquistion was not a complete waste. Sprint would never have been able to improve their CDMA service in so many markets as fast as they did and were able to save a lot of money by combining cell sites (synergy sites). Loyal and happy CDMA customers like myself are the ones who really came out of this as the big winners.

[spleck]

So what would be included in selling Nextel? iDEN-only users and the iDEN network obviously. What about hybrid users? What about the PCS G block, and if Sprint wants that block, don't they have to finish rebanding? How do they handle all the co-lo sites--will Sprint have to start paying a lease on all the sites they added? Maybe if they're only getting $5bil, Sprint will keep the towers and lease to Nextel.

I'm mainly curious about PCS G. It's valued at $5 billion--so its unlikely to stay with Nextel, but its contingent on the completion of rebanding. How would Sprint continue the rebanding effort if they sell off Nextel? Can you eat your cake and have it too?

[Jay2TheRescue]

Originally Posted by spleck

So what would be included in selling Nextel? iDEN-only users and the iDEN network obviously. What about hybrid users? What about the PCS G block, and if Sprint wants that block, don't they have to finish rebanding? How do they handle all the co-lo sites--will Sprint have to start paying a lease on all the sites they added? Maybe if they're only getting $5bil, Sprint will keep the towers and lease to Nextel.

I'm mainly curious about PCS G. It's valued at $5 billion--so its unlikely to stay with Nextel, but its contingent on the completion of rebanding. How would Sprint continue the rebanding effort if they sell off Nextel? Can you eat your cake and have it too?

Maybe its like buying a house in such disrepair that you buy the property for the value of the land that its on, and get the house for free.

-Jay

[Simon5282]

Originally Posted by spleck

...... It's valued at $5 billion--so its unlikely to stay with Nextel.....

Five billion for the company? Any chance that someone would buy the company, let the customers go, shut down the network and use the spectrum for whatever they wanted?

[Jay2TheRescue]

Originally Posted by Simon5282

Five billion for the company? Any chance that someone would buy the company, let the customers go, shut down the network and use the spectrum for whatever they wanted?

Maybe its time we revived the "Wireless Advisor Wireless" discussion. we'd never be able to buy a network this cheap again..

-Jay

[larry]

I wonder why other companies besides T-Mobile's parent wouldn't be interested for such a cheap price. What about Alltel or US Cellular? Or a cable comapny?

[Jay2TheRescue]

Originally Posted by larry

I wonder why other companies besides T-Mobile's parent wouldn't be interested for such a cheap price. What about Alltel or US Cellular? Or a cable comapny?

You're right. I would think Comcast would have the resources to buy them.

-Jay

[spleck]

I think Sprint will be passing along some debt with Nextel, so the overall cost will be higher. I would guess 2-5 billion in debt.

[RJB]

Originally Posted by larry

I wonder why other companies besides T-Mobile's parent wouldn't be interested for such a cheap price. What about Alltel or US Cellular? Or a cable comapny?

Just my thoughts: Maybe they look at the company as a whole and dont want to take that big of a risk with the current situation. But this is just my idea.

[larry]

At least with a CDMA company purchasing Sprint there would be less synergies to have to deal with although the IDEN thing would still be a dark cloud above.

[Mobile Mike]

Originally Posted by larry

I wonder why other companies besides T-Mobile's parent wouldn't be interested for such a cheap price. What about Alltel or US Cellular? Or a cable comapny?

Originally Posted by RJB

Just my thoughts: Maybe they look at the company as a whole and dont want to take that big of a risk with the current situation. But this is just my idea.

Larry, I wondered the same thing, but I think Ryan made a great point. Maybe for Alltel and USCellular, it's too much of a financial risk (especially with there considerably smaller size), whereas DT has the financial wherewithal to handle a purchase like this.

I hope they have a plan to deal with all Sprint's issues if they do make a play for the company. If not, we'll watch another mobile titanic sink, which would really be a disaster.