Sprint Bags Partner

The wireless-affiliate buying spree continues.
Author:
Publish date:

Sprint

(S) - Get Report

ended a contract dispute by agreeing to purchase a Minnesota affiliate.

The Reston, Va., wireless shop says it plans to buy Northern PCS in a deal worth $312.5 million, including assumed debt. The Waite Park, Minn., telco employs 240 people and serves 236,000 subscribers. Sprint says the affiliate had $130 million in revenue last year.

In April, a Minnesota federal district judge ruled that Northern PCS could proceed with a lawsuit charging Sprint with breach of contract. Like several affiliates, Northern argued that the 2005 merger of Sprint with Nextel created a competitor and violated an agreement between the two companies.

Among the many complications encountered in the wake of the Sprint-Nextel merger has been the uprising among smaller telcos that sell wireless service under the Sprint and Nextel brand. In some regions, the merger pitted one affiliate against another -- or in a few cases, a Sprint affiliate against a Nextel unit.

The upshot is that Sprint has been forced into a costly buyout program to settle conflicts with several affiliates. A year ago, for example, Sprint paid $6.5 billion for Nextel affiliate Nextel Partners.

That deal compounded Sprint's inability to successfully integrate the Nextel operations. The rift has been one of the leading sources of Sprint's troubles. Service quality declined and deadbeat customers helped erode the company's once-stellar average revenue per user. The service issues led to rising customer defections, as measured by so-called monthly churn.

During a presentation to investors Tuesday, Sprint chief Gary Forsee said the company has made progress on this front. But he was not willing to say that the company had stopped losing subscribers. He did say that the company was "at or near" the point of swinging positive on subscriber growth. He stuck with the 2% churn rate Sprint has targeted for the year.

In the most recent quarter, Sprint lost 220,000 net customers, with an eye-popping churn rate of 2.3%. Competitors' rates have been as low as 1% in recent months.

Sprint shares rose 36 cents to $21.96 in midmorning trading Wednesday.