10-Q Watch: Sprint Mulls Options For Nextel's iDEN Network; Are There Any?

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Tricia Duryee

mocoNews.net
Sunday, August 10, 2008; 11:00 PM

Sprint ( NYSE: S) Nextel provided two reminders last week that it is still in total turmoil. First off, it canceled a $3 billion convertible stock offering the day after announcing it, citing a challenging lending environment, and then it reported in a SEC document that it was exploring alternatives for Nextel's iDEN network. The options include: improving operations, making investments, entering into partnerships, or a sale. But added that the company really doesn't know if any of them are feasible, or if there isn't another alternative out there.

Because of this and his own suspicions, Walter Piecyk, an analyst with Pali Research, initiated coverage on Nextel Communications last week based on his belief "that there is a reasonable probability the iDEN business will be sold this year." Part of his reasoning is that Sprint set up an incentive package for one of its execs that includes a $1 million payout upon the "strategic resolution of the iDEN network." The other sign was the $3 billion debt offering, which no longer exists. Beyond not being able to raise the funding, Sprint Nextel will also have a hard time finding a buyer for the iDEN network, which it bought in 2005 for about $34 billion. Since then, Reuters reports that the assets have likely plunged 80 percent in value to around $5 billion. Let's recount the reasons why: The network is outdated, slow, and doesn't have any logical upgrade path to 3G; customers are leaving in droves; it's integrated with Sprint's operations; and it still has to give back a portion of its spectrum to the FCC for emergency communications. Without Nextel, Sprint would lose about 14.6 million subscribers, which would leave it with about 37 million?or roughly 7 million more than its next closest competitor?T-Mobile USA.

Any ideas on what Sprint should do?

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