Staff members at the Federal Communications Commission have drafted a proposal recommending approval of the merger between Sprint Corp. and Nextel Communications Inc., according to sources close to the agency.
The agency's four commissioners are considering the proposal approving the $35 billion deal, sources said, speaking on condition of anonymity because deliberations are still underway. Some commissioners are concerned that the companies expect to miss a deadline to offer 911 emergency calling over their phones, but final approval could be granted as early as the end of the month, a source said.
Both companies plan to meet with their shareholders tomorrow to vote on the deal, which would create the nation's largest wireless-only service provider. Yesterday, Sprint moved to eliminate a legal challenge to the merger by announcing that it will purchase an affiliated wireless company that had filed suit against it.
Overland Park, Kan.-based Sprint will pay $1.3 billion in cash for the Louisiana-based US Unwired Inc., a company that operates a network and sells cell phone service under the Sprint brand to 500,000 customers. US Unwired built a network in areas where Sprint does not operate. Sprint said it bought the company to expand its reach.
Despite its longtime affiliation with Sprint, US Unwired has had a troubled history with the company. It filed suit last month alleging that the merger with Nextel violated its exclusivity agreement with Sprint. It also sued Sprint for fraud in 2003 in a dispute over the terms of the companies' business arrangement. As part of the deal announced yesterday, US Unwired will lift its request for a court injunction against the Nextel merger and will resolve any pending litigation between the companies.
Nextel faces a similar dispute with its affiliate Nextel Partners Inc., which last week asked a court to resolve disputes over its marketing and joint-venture agreements.
The Department of Justice must complete an antitrust review before Sprint's combination with Nextel can be finalized. But sources close to the deal say it's unlikely to hit any roadblocks because Sprint and Nextel already face competition from larger carriers such as Verizon Wireless and Cingular Wireless, which last year bought AT&T Wireless Services Inc.
The FCC's review of the Sprint-Nextel deal will likely kick into high gear this week following the agency's approval yesterday of a much smaller merger between Alltel Corp. Wireless and Western Wireless Corp.
Two weeks ago, the chief executives of Sprint and Nextel visited the commission to pressure it to complete the deal so the combined company could start planning its holiday-season marketing plans, sources said.