Sprint Nextel Corp. said yesterday that it would buy two affiliates that sell mobile phone service under the Sprint brand in transactions worth more than $700 million, a step that would end some litigation arising from the Reston company's recent merger.
Sprint Nextel, formed from the Aug. 12 combination of Sprint Corp. and Nextel Communications Inc., said it would acquire IWO Holdings Inc. for about $427 million, including the assumption of about $208 million in debt, and would spend roughly $287.5 million for Gulf Coast Wireless LP, including unspecified debt.
Sprint Nextel has eight other affiliates remaining around the country. The shareholders of one, Nextel Partners Inc. of Kirkland, Wash., have the right to demand that they be bought out. Analysts said Sprint Nextel could afford to buy all of its affiliates, if need be, though doing so would not be cheap. Banc of America Securities analyst David Barden said the remaining affiliates would cost more than $12 billion.
"It's all very manageable," Barden said. He estimated that Sprint Nextel has about $9 billion in cash on hand and that it will generate more than $3 billion in free cash flow this year.
Sprint Nextel spokesman Nicholas Sweers said the company was dealing with the affiliates case by case and stressed that "an acquisition is not the only solution."
Baton Rouge, La.-based Gulf Coast Wireless, which provides Sprint service to more than 95,000 subscribers in southern Louisiana and Mississippi, had sued Sprint arguing that the merger with Nextel violated an agreement barring Sprint from operating in its territory.
As a result of the buyout, Gulf Coast Wireless President Robert Burgess said, the company has sought a stay of its lawsuit against Sprint and will seek its dismissal when the acquisition goes through.
Sprint Nextel has confronted a series of such legal challenges because Nextel offered service in parts of the country where Sprint had granted exclusive rights to some affiliates.
Albany, N.Y.-based IWO Holdings, which sells Sprint service to more than 237,000 subscribers in upstate New York, New Hampshire, Vermont and parts of Massachusetts and Pennsylvania, did not sue Sprint Nextel.