Nextel Partners Questioning Merger

[Barry]

Nextel Partners delivered a Notice Invoking Alternate Dispute Resolution Process to Nextel Communications under its joint-venture agreement signed between the two companies in early 1999. According to a SEC filing, Nextel Partners said the notice claims that certain elements of Nextel's pending acquisition by Sprint Corp. will violate obligations under the joint-venture agreement. Those violations include Nextel Partners not being able to use the same brand identity as the combined Sprint/Nextel, which recently announced the Sprint name would be used to brand the combined Sprint/Nextel service.

Nextel Partners added that changes to marketing and national accounts, operational issues and excluding Nextel Partners from participating in discussions regarding branding and other operational matters has violated its joint-venture agreement. Nextel Partners also said that it has taken action against Nextel in New York Supreme Court, asking the court to issue an injunction preventing Sprint from closing on its acquisition of Nextel or preventing Nextel from making any branding changes pending the outcome of Nextel Partners' dispute with Nextel.

In an SEC filing last month, Nextel Partners' management said it would encourage shareholders to vote in favor of a put option that would require Nextel to acquire its affiliate for "fair market value" plus a put premium following Sprint's acquisition of Nextel, which is expected to close during the third quarter. Sprint is facing similar challenges from its affiliates that claim their network agreements prevent Sprint from offering a competing wireless service in their markets.

Analysts have said they expect the combined Sprint/Nextel eventually to acquire their affiliate partners following the completion of Sprint's acquisition of Nextel, though the timing of the roll-up could be impacted by the affiliate agreements.

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[ruby]

Sprint Nextel intends to pursue the appraisal process under network affiliate Nextel Partners' "put" provision instead of moving forward with a negotiated acquisition.

Nextel Partners has said it would recommend its shareholders initiate the "put" option following Sprint Corp.'s acquisition of Nextel that closed Aug. 12. The "put" option requires Nextel to purchase the 68 percent of Nextel Partners it does not currently own at "fair market value" plus a "put premium."

If initiated, Nextel Partners' "put" provision calls for both Sprint Nextel and Nextel Partners to appoint an appraiser to determine the "fair market value" for Nextel Partners' stock. If the appraisals are more than 10 percent apart, a third appraiser will be appointed to set a final value. Sprint Nextel said the appraisal process could take at least four months to complete.

Nextel Partners' stock was trading at a 52-week high of $27.40 per share early Wednesday before dropping to $26.23 per share by mid-day, giving the carrier a market capitalization of more than $7 billion. Nextel Partners currently holds spectrum licenses covering 54 million potential customers in 13 of the nation's top 100 markets.

[ruby]

HEre is Nextel Partners' response.

Nextel Partners sent a response to Nextel Communications Inc. following a letter it sent to Nextel Partners regarding terms of Nextel Partners' "put" option, which the affiliate can now trigger following Nextel's acquisition by Sprint Corp. last week.

"In the context of Nextel Communications' obvious desire to reduce the price it will have to pay for Nextel Partners if the put is exercised, your letter just appears to be part of Nextel Communications' ongoing, and in our view inappropriate, campaign to try to hurt the trading price of Nextel Partners' stock," Nextel Partners' counsel wrote in a letter filed with the Securities and Exchange Commission. "I sincerely hope that Nextel Communications and Sprint Nextel will not use your letter as an excuse for another gratuitous public filing."

Nextel has repeatedly questioned the valuation of Nextel Partners in relation to the "put" option, noting the affiliate's stock price surged to levels not supported by the carrier's financial performance following Sprint's announced plans to acquire Nextel last December. Nextel Partners' stock has jumped more than 45 percent since December to around $27 per share.

Nextel Partners' management has said it will recommend its shareholders pursue the "put" option, which would require Sprint Nextel to acquire the remaining 68 percent of Nextel Partners it does not currently own for "fair market value" plus a "put premium."

Nextel Partners' stock was trading up 41 cents per share early Thursday at $26.95 per share, just off its 52-week high of $27.40 per share set yesterday. Analysts have said that Nextel Partners' stock could fetch between $30 and $32 per share including its "put premium" if the carrier's shareholders agree to initiate the "put" option.

Sprint Nextel reported earlier this week that it intends to pursue an appraisal process in determining the value of Nextel Partners instead of moving ahead with a negotiated acquisition. The appraisal process calls for both Sprint Nextel and Nextel Partners to appoint an appraiser to determine the "fair market value" for Nextel Partners' stock. If the appraisals are more than 10 percent apart, a third appraiser will be appointed to set a final value. Sprint Nextel said the appraisal process could take at least four months to complete.

[Barry]

It's not over yet, Nextel Partners reported that more than 20 percent of its class A common stockholders have requested that the carrier call a special meeting to vote on whether to exercise its "put right." If approved, the "put right" would require the newly combined Sprint Nextel Corp. to purchase the 68 percent of Nextel Partners it does not currently own for "fair market value" plus a "put premium" that would be determined through an appraisal process.

Nextel Partners' management previously stated that it would recommend to its shareholders approval of the "put" option, which was triggered after Sprint Corp. acquired Nextel Communications Inc. Analysts have predicted that Nextel Partners' "put" option and "put premium" could garner as much as $30 per share for Nextel Partners' shareholders. Nextel Partners' stock was trading at $26.40 per share early Thursday, giving the carrier a total market capitalization of $7.12 billion.

Sprint Nextel said earlier this month that it intends to pursue the appraisal process under Nextel Partners "put" provision instead of moving forward with a negotiated acquisition. If initiated, Nextel Partners' "put" provision calls for both Sprint Nextel and Nextel Partners to appoint an appraiser to determine the fair market value for Nextel Partners' stock. If the appraisals are more than 10 percent apart, a third appraiser would be appointed to set a final value. Sprint Nextel said the appraisal process could take at least four months to complete.

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[Barry]

Nextel Partners lost a bid to stall Sprint Nextel Corp.'s national brand rollout as a three-member arbitration panel ruled Nextel Partners had not demonstrated a likelihood of success on the merits of its claim that the rollout breached its affiliate agreement. Nextel Partners claimed its affiliate agreement was breached following Sprint Corp.'s acquisition of Nextel Communications Inc. Aug. 12.

The arbitration panel, which held a full-day hearing Aug. 25, rejected Nextel Partners assertion that its affiliate agreement required Sprint Nextel to either allow Nextel Partners to use the new Sprint logo or to sell Nextel iDEN products only under the Nextel brand and not under the new Sprint brand. The panel also ruled that Nextel Partners would not be irreparably harmed by the rollout of the new Sprint brand.

Nextel Partners noted that the panel found that Nextel Partners likely would prevail on its claim that the use of the new Sprint-Nextel brand by Nextel's operating subsidiaries without making the new brand available to Nextel Partners violated the nondiscrimination provision of its affiliate agreement.

The panel added that Nextel Partners could be reimbursed financially for any loss of value during its "put" process associated with its inability to use the new Sprint-Nextel branding. Despite the setback, Nextel Partners still is expected to move ahead with another provision of its affiliate agreement that would require Sprint Nextel to acquire its affiliate.

Sprint Nextel said that it intends to pursue the appraisal process under Nextel Partners "put" provision instead of moving forward with a negotiated acquisition. If initiated, Nextel Partners' "put" provision calls for both Sprint Nextel and Nextel Partners to appoint appraisers to determine the fair market value for Nextel Partners' stock. If the appraisals are more than 10 percent apart, a third appraiser would be appointed to set a final value. Sprint Nextel has said the appraisal process could take up to four months to complete.

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[Barry]

The majority of Nextel Partners's class A common shareholders voted in favor of the carrier exercising its put right option that will require Sprint Nextel Corp. to acquire the remaining 68 percent of Nextel Partners it does not already control. Nextel Partners said that 99.9 percent of the more than 85 percent of the company's class A shares that voted at a special meeting voted in favor of the put option.

Nextel Partners' management had previously urged shareholders to vote in favor of the put option. Nextel Partners and Sprint Nextel are now required to select an appraiser to determine the fair market value of Nextel Partners within the next 20 days. Nextel Partners has already designated Morgan Stanley as its appraiser.

If the two appraisals differ by more than 10 percent, a third appraiser will be tabbed to deliver a third appraisal to determine the final value of Nextel Partners. Nextel Partners stock was trading up 1 cent per share midday Monday at $25.52 per share.

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[Mod]

So it continues, Nextel Partners won another battle as a judge ruled the carrier could disclose the results of the first two appraisers in its ongoing battle with Sprint Nextel in determining a "fair market value" price for Sprint Nextel's forced purchase of the 68 percent of Nextel Partners it does not already own.

Sprint Nextel had claimed that the findings of the third appraiser would be tainted by the release of the first two appraisals. Nextel Partners countered that all three appraisals should be conducted at the same time in order to avoid any contamination.

Nextel Partners also noted that the Delaware court agreed that the affiliate's interpretation of how the fair market value should be determined. Nextel Partners has said that its affiliate agreement calls for a fair market valuation to discount any negative impact the carrier's use of iDEN technology or non-congruent spectrum would have on determining the company's value. Sprint Nextel had claimed that Nextel Partners' technology and spectrum position make it attractive only to Sprint Nextel as an acquisition target.

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[Mod]

Sprint Nextel has finally completed the Nextel Partners issue and will purhcase 68% share in the company; it does not currently control for $6.5 billion.

Nextel Partners had the right to require Sprint Nextel to buy the remaining interest of the company that Sprint Nextel did not already own after Sprint Corp. acquired Nextel Communications Inc on Aug. 12. Nextel Partners shareholders invoked the put option in October, triggering an appraisal that determined the purchase price.
continued below

The purchase price of $28.50 per share of Partners' Class A stock was a compromise between market values determined by two appraisers, Nextel Partners' appraiser Morgan Stanley (which estimated Partners' value to be $29.75 per share) and Sprnit Nextel's appraiser Lazard (appraisal of $27.25 per share). According to Nextel Partners' charter, the two prices were averaged since they were within 10 percent of one another. The purchase price provided Nextel Partners with a total value of about $10 billion.

The transaction must receive regulatory approvals and is expected to close in the second quarter of 2006. The put price is final and binding on all Nextel Partners shareholders, unless they opt to challenge the price, in which case they would receive a price "estimated to be well below the put price."

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[Admin]

Sprint Nextel can go ahead with the acquisition of Nextel Partners according to the Federal govt. The authorization from the FCC completes all the regulatory approvals needed to complete the transaction.

Nextel Partners shareholders voted in October 2005 to exercise a put right that required Sprint Nextel to acquire the company, and the two companies agreed to a purchase price of $28.50 per share, or about $6.5 billion.

Another Sprint Nextel affiliate, UbiquiTel Inc., received an additional recommendation that its shareholders support the sale of the company to Sprint Nextel. Glass Lewis & Co., an independent proxy advisory firm, advised that shareholders vote in favor of the acquisition at their meeting on June 27. Institutional Shareholders Services already has indicated that it believes shareholders should support the $1.3 billion sale.

[Mod]

Sprint Nextel continued the work of reeling in its affiliates, as the national carrier closed on its acquisition of Nextel Partners. Sprint Nextel completed its $6.5 billion buyout of iDEN affiliate Nextel Partners, the largest of the company’s affiliates with about 2 million customers and a network covering 54 million POPs in 31 states.

Sprint Nextel will leave all sales and customer service channels in place as it eventually transitions customers and support functions to its own systems.

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