Sprint to Buy Out Nextel Partners

$6.5 Billion Deal Ends Battle Over Affiliate's Value

Sprint Nextel Corp. agreed yesterday to pay $6.5 billion to buy out the shareholders of Nextel Partners Inc., ending a dispute over the value of the Kirkland, Wash.-based company, which offers mobile phone service under the Nextel brand.

The settlement removes a distraction that has loomed over Sprint since its August merger with Nextel Communications Inc.

Sprint Nextel said it would pay $28.50 per share for the roughly 69 percent of Nextel Partners it does not already own.

The Reston-based company, the nation's third-largest mobile phone provider, was obliged to buy out Nextel Partners shareholders under a long-standing agreement between Nextel and Nextel Partners.

Nextel Partners, which has about 1.9 million mobile phone subscribers, helped build Nextel's wireless network in medium-size cities and rural areas. It operates in 31 states, chiefly in the Midwest and the South.

Wireless companies such as Sprint and Nextel have found it useful to enlist affiliates like Nextel Partners to share the huge investment costs involved in constructing cell towers and expanding their networks.

Nextel Partners shareholders in October voted to exercise their right under their agreement with Nextel to sell their shares to Sprint Nextel, triggering a process under which each company named an appraiser to determine the value of the company.

Investment bank Lazard Freres & Co. valued Nextel Partners at $8.8 billion, or $27.25 per share, while Morgan Stanley appraised it at $9.6 billion, or $29.75 per share. Because the two figures were less than 10 percent apart, the agreement called for the price to be set at the average. If the appraisals had been more than 10 percent apart, the matter would have been referred to a third appraiser.

Sprint Nextel and Nextel Partners have squabbled publicly over the value of the company and how to conduct the appraisal process. For both companies, the agreement on price ends uncertainty that could have dragged on into February if a third appraisal had been necessary. The $28.50 price is binding unless it is challenged by Jan. 9, Sprint Nextel said.

The deal is subject to the approval of the Department of Justice and the Federal Communications Commission and is expected to be completed by the end of June, Sprint Nextel said in a statement.

"As we work through the regulatory approval processes, we intend to focus on plans for efficiently integrating Partners' business into our operations in a way that is seamless for customers and employees," Sprint Nextel chief executive Gary D. Forsee said in a statement.

"We see this event as positive for Sprint Nextel," Bank of America analyst David C. Barden wrote in a research report. "Sprint Nextel removes a substantial overhang and sets the stage for unifying its go-to-market strategy in Nextel Partners' territories."

Nextel Partners shares surged on the news, rising $1.52, or 5.8 percent, to close at $27.84. Sprint Nextel shares fell 17 cents, or 0.7 percent, to end at $24.47.

Nextel Partners is the sixth affiliate Sprint and Sprint Nextel have agreed to buy since their plans to merge were announced a year ago.

Sprint Nextel can either negotiate purchases or strike new partnership deals with its five remaining Sprint affiliates: iPCS Inc., UbiquiTel Inc., Northern PCS Services LLC, Shenandoah Telecommunications Co. and Swiftel Communications Inc.