Sprint Nextel has announced on Wednesday that it is planning to take over affiliate Northern PCS Services in a deal worth $312.5 million, marking the seventh such acquisition for the wireless company in the last two years. From the time when Sprint’s 2005 merger with Nextel, which formed the nation’s third-largest wireless carrier, the Reston firm has absorbed many of its affiliate partners, which have absolute rights to sell services under the brand in markets where Sprint does not operate. The Minnesota-based affiliate at present serves more than 167,000 direct wireless subscribers in Minnesota, Iowa, North Dakota and Wisconsin. The company further informed that the agreement includes the assumption of Northern PCS’s debt, and should close in the third quarter, subject to regulatory approvals.
Sprint and Nextel have to a large extent depended on associates to provide service in smaller, mainly in rural markets. Some affiliates, including Northern PCS, had filed lawsuit against Sprint Nextel, on the ground that selling products with the Nextel brand would violate Sprint’s prior agreement not to compete with affiliates in their territories. In several cases, purchasing the local partners was a cheaper, quicker alternative to settling legal disputes. In addition, the purchase of Northern PCS created an additional integration problem for Sprint, which has struggled to attract customers while combining its operations, retail outlets and wireless networks with those of Nextel.
With this planned acquisition, the firm has now three affiliates left: Swiftel Communications, based in South Dakota and Iowa; Shenandoah Telecommunications in southwestern Virginia; and iPCS in Illinois. Sprint spokesman James Fisher refrained to comment on plans to purchase more affiliates. Sprint is at present involved in a legal dispute with iPCS, its largest affiliate. The service provider had lodged two lawsuits against Sprint in July 2005. The issues were settled in iPCS’ favor last year; and Sprint is contemplating to appeal one of the final orders.
However, a faction of analyst still believe that the Northern deal should not be considered as an indication that Sprint is pressing forward with its acquisition of the remaining affiliates. In addition to it, even if it settles its dispute with the affiliates, Sprint still faces vital questions over how it will grow its business. The company was make a great effort to expand its customer base over the last few quarters as it has been constantly loosing valuable contract subscribers to competitors.
