Sprint cancels plan to sell preferred stock as talk of Nextel sale grows

Aug 08, 2008 (The Kansas City Star - McClatchy-Tribune News Service via COMTEX) -- S | Quote | Chart | News | PowerRating -- Aug. 8--Sprint Nextel appears to be actively considering the sale of its Nextel network.

The Overland Park company's shares rose 6 percent Thursday amid news of its Nextel intentions and Sprint's announcement that it scrapped a sale of $3 billion in preferred stock.

"As we went to market today, the terms being offered were not economically attractive," said Bill White, Sprint's senior vice president of corporate communications.

Sprint previously said it intended to sell 3 million shares in a private placement as the company redoubled efforts to trim its $23 billion in debt.

"We anticipated paying down debt on a more accelerated basis," said White, who said Sprint remains committed to reducing debt by at least $1 billion in the third quarter.

The decision to cancel the stock offering did not come because of any concerns potential buyers raised about Sprint, White said.

"We are on solid financial footing," White said. "We have plenty of liquidity."

Sprint's chief financial officer, Bob Brust, said Wednesday that the company recently agreed to sell thousands of cell towers for $670 million, which would help reduce debt. Sprint will continue seeking similar transactions, he said.

On that same day, company executives offered new details on how they view the challenged Nextel business.

Keith Cowan, Sprint's president of strategy and corporate development, is to receive a $1 million cash award "upon the board's approval of the strategic resolution" of the company's Nextel network, according to documents Sprint filed Wednesday with the Securities and Exchange Commission.

The $1 million is part of an overall $1.5 million in bonuses approved for Cowan because of his leadership in guiding the company's attempted turnaround, particularly his roles with merger-and-acquisition activity, according to a letter that Sprint chief executive Dan Hesse issued to Cowan.

The future of the Nextel portion of Sprint's business has been in question for months.

With a high-performance walkie-talkie service, Nextel once was able to command premium prices from a substantial number of fiercely loyal contractors, taxi drivers and other customers.

Network problems, however, resulted at times in poor call quality and a rising level of customer frustration.

The phones also do not offer all of the increasingly popular high-speed wireless data services.

The Sprint portion of the company's network serves an increasingly larger portion of its subscribers. The Nextel, or iDEN, portion of the network has lost more than 5 million, or 26 percent, of the subscribers it served at the end of June 2007.

"As we refine our business strategy, we continue to evaluate opportunities to strengthen our business and implement cost reduction initiatives which may include de-levering and disposing of assets," Sprint stated in the securities filing. "For example, we are exploring alternatives for our iDEN network and related operations that include improving operations, making additional investments, entering into strategic partnerships and considering potential divestitures."

Sprint said it recently valued the Nextel network at about $7.8 billion.

The company has been attempting a tricky dance to reassure investors that it is stabilizing eroding portions of its business while at the same time reassuring Nextel subscribers that it will continue to provide them good service.

"So we are very committed to our customers on iDEN and making that a great experience," Hesse said Wednesday in response to an analyst's question. "But what I have also said is that since I've taken this job that every option is on the table and every option will continue to be considered."

Walter Piecyk, an analyst with Pali Research, issued an investor note Thursday that said the sale of the Nextel business is inevitable but probably not imminent.

Sprint shares closed Thursday at $7.79, up 45 cents.

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@ Go to KansasCity.com for Sprint Connection, a blog featuring news, views and noise about Sprint Nextel.

To reach Jason Gertzen, call 816-234-4899 or send e-mail to jgertzen@kcstar.com.

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