Sprint Corp. is expected to announce this week a plan that would restructure its ownership in Sprint Spectrum L.P. and allow its cable partners to exit the business.
Sprint confirmed that it has made substantial progress in negotiating with its three cable partners-Tele-Communications Inc., Comcast Corp. and Cox Communications Inc.-to form a new structure that would allow Sprint to acquire full ownership of Sprint PCS and PhillieCo, which will be combined with Sprint’s solely owned SprintCom basic trading area properties.
The cable partners would receive a new Sprint PCS tracking stock in exchange for their partnership interests, and in turn, they could sell portions of their shares for cash. Sprint also expects to make an initial public offering of Sprint PCS shares.
In addition, Sprint plans to recapitalize its stock to convert existing Sprint common stock into one stock that tracks Sprint’s wireless business and another that tracks Sprint’s other businesses.
It is no secret Sprint’s cable partners have wanted to redefine their role in the partnership for more than a year. Sprint PCS, which aggressively has been launching Code Division Multiple Access networks nationwide, hasn’t given the partners a return on their investment, and increased competition in the cable industry has forced them to focus and invest in their core businesses.
Sprint reportedly ran into trouble earlier this year when its partners became reluctant to put any more money into the venture. All three cable companies are reporting huge losses associated with the rollout of Sprint PCS service.
The original intent of the Sprint-cable partnership has changed as well. When the companies formed the new venture in 1994, the plan was to compete head-on with existing local telephone companies by using cable TV lines and new wireless communications technology.
“The market moved away from a cable model, and mobile facilities became less important for cable companies,” said Simon Reeves, senior analyst with Decision Resources in Waltham, Mass. “A one-person, one-phone type of model takes a lot more investment. The cable companies are reluctant to do this.”
TCI, the second-largest owner in the venture, began agonizing over the debt load by early 1996 and created two new series of Telephony Group tracking stocks, one of which tracks its 30-percent interest in Sprint PCS.
Sprint reportedly was intensifying its search late last year for an international partner to construct a possible merger or partnership scheme that would give it enough cash to buy out its partners. Sources close to the company say Sprint still is interested in finding an international partner, though the company publicly has indicated it is not searching for a merger partner. The name of the game is global positioning, say analysts, and international telecommunications companies are eager to join with U.S. companies to enter the U.S. local access business.
Separately, British Telecommunications plc said it is continuing its search for a U.S. partner after its planned alliance with MCI Communications Corp. fell through.
