Sprint Nextel to acquire iPCS : $831M deal ends years of legal wrangling

Sprint Nextel Corp. amputated a source of legal and operational frustration this morning announcing plans to acquire network affiliate iPCS Inc. for $831 million. The deal puts to an end a smattering of legal challenges posed by iPCS that could have forced the industry’s No. 3 operator to turn over its operations in markets served by the affiliate.
The deal includes the assumption of $405 million in debt and values iPCS’ stock at $24 per share, which was a 34% premium to the affiliate’s closing price prior to the deal’s announcement. Sprint Nextel will gain control of iPCS’ 710,200 customers across portions of Illinois, Michigan, Pennsylvania, Indiana, Iowa, Ohio and Tennessee.
More importantly for Sprint Nextel, the deal closes a long series of legal actions brought against the carrier by iPCS following Sprint Corp.’s $35 billion acquisition of Nextel Communications Inc. in 2004. According to iPCS, and backed by a handful of court decision, the deal violated the affiliates agreement with Sprint that prevented the carrier from competing directly against iPCS in the markets it served. The acquisition of Nextel put the combined Sprint Nextel in control of iDEN operations in iPCS’ service areas, as well as eventual WiMAX operations now operating under Clearwire Corp. iPCS also recently filed a lawsuit against Sprint Nextel following its announced acquisition of mobile virtual network operator partner Virgin Mobile USA Inc for violating its affiliate agreement.
Sprint Nextel acquired a number of its other affiliates following its merger, including UbiquiTel Inc. for $1.3 billion, Alamosa Holdings Inc. for $4.3 billion and the $6.5 billion takeover of iDEN affiliate Nextel Partners Inc. IPCS was left out of the initial acquisition frenzy by the lawsuits, which were backed by a more stringent affiliate agreement that prevented Sprint Nextel from operating any network or service in iPCS’ markets and not just those operating in the 1.9 GHz frequency band that other affiliates operated under.
“We are very pleased to have reached this agreement with Sprint Nextel,” said Timothy Yager, president and CEO of iPCS, in a statement. “Given the increasingly competitive landscape, we believe this is an opportune time to provide our shareholders with a liquidity event at a very attractive price. iPCS shareholders will receive a significant and immediate premium for their shares and our customers will continue to receive the same excellent service from the same dedicated people who provide that service today. We look forward to working with the Sprint Nextel team to ensure a smooth completion of the transaction and transition in the coming months.”
Sprint Nextel’s financial advisor for the transaction was Citigroup Global Markets Inc. and its principal legal advisor was King & Spalding L.L.P. iPCS’ financial advisors were UBS Investment Bank and Morgan Stanley & Co. Inc. and its principal legal advisor was Mayer Brown L.L.P.