Sprint – Selling Off Nextel?

Implications: Analysts have hated talking about selling off Nextel. Most analysts have seen the sale of the Nextel network as a failure on the part of Sprint; however, I don’t. Saving Sprint needs to be viewed from the perspectives of creditors and bond owners.

Analysis: Restructuring is not about failure.  Restructuring is about recognizing past errors and taking the appropriate steps to fix past mistakes.  Selling Nextel will generate cash.  Selling Nextel will generate stability in the network operations side of the house.  Further, the company can finally look like one company instead of a company operating two distinct, dissimilar, and disconnected networks with two disconnected customer bases.

Sprint needs to raise cash now to reduce its debt load and stabilize itself.  Selling Nextel would generate cash for the company and better position itself for growth.  Sprint can continue doing joint ventures but the reality is that the joint ventures are partially designed to offset Sprint’s capital expenditures.  It would be wise for Sprint to reduce its debt and to fill its coffers.

iDEN is a TDMA based cellular technology.  I have said in past analyses the iDEN network offers litlle to no value to Sprint.  Motorola has done little to nothing to enhance and upgrade iDEN to keep pace with the various 3G and 4G technologies.

However, do not get me wrong, iDEN can still work for a carrier.  I have said this over and over and over again; Morgan O’Brien ought to buy the Nextel network for his company Cyren Call.  O’Brien is the first CEO and the only CEO to ever operate a wireless network that was comprised of that many disparate frequency bands; quite literally a patchwork of frequencies.  O’Brien founded FleetCall in the late 1980s.  O’Brien is the only guy I know who can operate the patchwork called Nextel.  He did it once before and he can do it again.  The Nextel network could be converted to a public safety network more easily than if Cyren Call built a new one from scratch.  Of course there are a bunch of local and state public safety regulatory and political issues to consider.  However, O’Brien has a relationship with all of the public safety dispatch agencies – the man is almost a legend in that community.

Raising cash now is paramount for Sprint.  Dan Hesse can get a couple of stalking horses to bid for Nextel.  I am sure stock brokers would want a buying frenzy to occur to boost Sprint's stock.  However, the danger for this kind of orchestrated speculation is the scrutiny other analysts and the trade press will place any potential buyers under.  Here is the bottom line, Telus is not a viable candidate, Deutsche Telekom is not a viable candidate, neither is SK Telecom, and neither is AT&T Mobility.  Once the trade press starts asking questions; the dumber the deal looks, the worse it will be for Sprint’s and the potential suitors’ stock prices.

On Telus – the company currently uses CDMA and is contemplating GSM (as of this writing).  Do we really want our Canadian neighbors to spend money on acquiring a company when they should be spending the money on the conversion?  Where is the synergy?  Telus could end up spending over $250 Million on a conversion – that is not chump change in Canada or even the USA.  I hope the Canadians are not going to fall under the pressure of the stock market and do another Sprint-Nextel merger.  Yes Nextel can bring cash into Canada but for goodness sakes, the Canadians have a major undertaking they want to launch now.

As for Deutsche Telekom; please read my analysis entitled; “Forget About Deutsche Telekom – Cyren Call May the Next Owner of Nextel”.  Also read; “Sprint’s QChat – A Step Closer to Selling Nextel – Thoughts on Buyers”.

As for SK Telecom, read, "SK Telecom Says No To Buying Sprint – GOOD !!!!!"

As for AT&T Mobility; no.  The company needs to focus on integrating the operations already under its roof.  To add a disconnected and disparate patchwork network like Nextel is nothing but trouble for a company that has spent the last 3 years trying to pull itself together.

We are in a recession; cash is in short supply for acquisitions that make no sense.  Please let us limit the number of senseless acquisitions using leverage. 

As I have said, a more logical buyer for the Nextel network and spectrum is Morgan O’Brien and Cyren Call.  The Nextel network could be converted to a public safety network more easily than if Cyren Call built a new one from scratch.