Sprint Told to Shutter Nextel in 81 Markets

November 16th, 2008 by · 3 Comments

It was only two weeks ago that Sprint said it would in fact rejuvenate the Nextel network rather than sell it.  Now a court has given them 12 months to shut it down in 81 markets mostly in the Midwest due to conflicts in their affiliate agreement with iPCS.  Even assuming that Sprint manages to delay this brings up the obvious question, how do you rejuvenate a network that you have been ordered to shut off?

It’s quite a position they are in.  They can’t sell Nextel because the buyers can’t raise money in this market.  They can’t easily buy iPCS as they did many other such resellers because their financial position is not strong enough to do it without help from the credit markets, which is obviously not forthcoming.  So they have to keep it, but they can’t keep it.  They want to rejuvenate it, but have been told to shut it off.   It took serious talent to get into this Gordian Knot, someone had better find the guy with the sword.

But does iPCS really want to further damage the position of the company they partner with?  Sprint’s stock has been in a tailspin, closing Friday at $2.34 and a marketcap of just $6.57B. By now we’re used to seeing the riskier nexgen fiber companies losing 90% or more of their value in this economic disaster, but to see Sprint, which traded just 18 months ago at above $23, getting hammered like this – it’s just amazing to watch.  You have feel that Sprint and iPCS will come to some arrangement this winter, one way or another.

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Categories: Financials · Internet Backbones · Mergers and Acquisitions

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3 Comments So Far

  • carlk says:

    Gee Rob, I find your 90 percent off comment rather odd in addition to an uncanny parallel to under performing metric with xoHO.

    Probably because to date, on a one or two year basis, LVLT remains the worst performer of the more important names, excluding Ichan’s, xoho, while being down approx. 76 percent according to Friday’s quote.

    Considering that LVLT could be considered the most important name in the next generation category, this seems rather odd, or does it?

    I look forward to a operating cash flow versus consolidated revenues basis spread sheet from you soon. After that, one showing positive free cash flow including debt would be just as interesting.

    Maybe it will soon be time for some of our more staunch debt owners to give up the ghost in order to participate in higher equity returns instead. That assumes we have enough matches between the two of course.

  • Rob Powell says:

    I should have made the 90% bit a bit less harsh, like 80-90% or something – it wasn’t meant to be an accurate number nor an average industry metric or something. Sorry about that, I’ll try not to be so overly dramatic – you can handle that part in comments. 🙂

  • carlk says:

    I think I should be called the “Drama Queen” then. 😉

    All kidding aside, the more excessive under performance (percentage and time wise) by LVLT and xoHO often seems tied.

    I’ll be happy to see the one with the weaker business plan die or merge sooner rather than later. I think I know who that is, but I’ve been wrong before.

    By the way, 12 percent of LVLT’s consolidated revenues go towards interest payments. The first 12 cents of every dollar goes to debt owners! They really have been the hogs or pigs at the trough for the entire history of this security. 🙁

    I think Jim Crowe could cut a significantly better deal with the U.S. Government in some form at this juncture. Of course, getting ahead of the curve on Networx from a revenue stand point, versus the one paltry account they have accumulated to date, would be music to shareholders’ ears, if DIRT CHEAP interest is not an option.

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