Sprint could spin off Nextel unit

WSJ is reporting that Sprint Nextel Corp. is seriously considering spinning off or selling its ailing Nextel unit.

This is a dramatic acknowledgement that Sprint’s $35 billion acquisition of Nextel Communications in 2005 has been a failure. Sprint could also choose to simply spin off Nextel into a separate company. However, no deal is imminent but people close to the company said that Sprint is currently preoccupied for the moment with other matters.

More specifically, Sprint is closing in on a deal to create a wireless broadband joint venture with Clearwire Corp. The new company would be backed by more than $3 billion in equity financing from leading cable providers and tech giants including Intel Corp. and Google Inc.

The deal would value the new venture at more than $12 billion.

Dealing with Nextel would be the next major strategic priority for Sprint and its relatively new chief executive, Dan Hesse. There is a sense of heightened urgency within the company about the rapid decline of Nextel, which has seen a steady stream of subscriber losses in recent years due to poor call quality, customer service and handset selection. The mere prospect of unwinding the Sprint-Nextel deal is startling, given the high hopes investors and executives at both companies had at the time of the union, which created the nation’s No. 3 wireless operator.

Selling the Nextel division could make Sprint a more attractive takeover target. Germany’s Deutsche Telekom AG is weighing whether to make a bid for Sprint, according to people familiar with the matter.

It isn’t clear what price Sprint could fetch for Nextel, but analysts say the carrier is worth a fraction of its worth at the time of the deal after shedding so many customers.

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About Ron Haruni 1067 Articles
Ron Haruni is the Co-Founder & Editor in Chief of Wall Street Pit.

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