Sprint may divest Nextel's iDen business
11 August 2008
After selling its tower infrastructure business TowerCo in the last fortnight for an estimated $670 million to reduce its $23 billion debt, the third largest US wireless operator Sprint Nextel is reported to be mulling the divestiture of Nextel that it acquired for $35 billion in 2005, but whose value has plunged steeply to just $5billion.
Sprint was once was able to command premium prices from Nextel's high-performance walkie-talkie or iDen service, but issues connected with poor call quality and the absence of high-speed wireless data services led to more than 5 million, or 26 per cent of the iDen subscribers abandoning the service by end June 2007, while the Sprint portion of the company's network served an increasingly larger portion of the merged entity's subscriber base of nearly 52 million.
Moreover, Sprint has come under pressure from the US Federal Communications Commission to give up a key portion of the iDen wireless airwaves for emergency communications networks
In a regulatory filing, Sprint said that it was exploring alternatives for iDen including "improving operations, making additional investments, entering into strategic partnerships and considering potential divestitures.
Since acquiring it Sprint has struggled to integrate the iDen network with its own services even as as its value has declined a whopping 80 per cent.
Though analysts say the sale of the Nextel is inevitable, they also say Sprint may have trouble finding a buyer for it given the multitude of technologies that are not global standards being uswed by the merged entity.
Once Sprint manages the divestiture, they point out, the sale of the rest of Sprint to potential buyers like buyers that include Comcast, SK Telecom, Deutsche Telekom and or Verizon becomes more likely.
However, buyers are likely to be put off by the daunting prospects of having to reverse the now-completed integration of the iDen business, including its billing, broadcast towers and customer service. In addition, iDen, developed by Motorola, has now been overtaken by newer network standards and high-speed wireless data services.
Reports have named Latin American service provider that uses iDen technology, NII Holdings Inc, and private equity investors as being interested in the network.