Sprint Blames iPCS Affiliate for iPCS's Financial Woes - TheStreet

Sprint

(FON)

said its bankrupt wireless affiliate

iPCS

is wholly to blame for the affiliate's financial doldrums, in response to a complaint that the nation's fourth-largest carrier violated contractual agreements.

"iPCS's financial problems are due to its debt load and have nothing to do with Sprint's actions," said Dan Wilinsky, a spokesman for Sprint's wireless unit,

Sprint PCS

(PCS)

. "As a separate and independent business, iPCS is alone responsible for its financial condition. To blame Sprint for economic conditions and the competitive nature of the wireless industry is ludicrous."

Investors cheered the response and sent Sprint PCS shares up sharply higher at the open, but the shares were up just a nickel, or 1.2%, at $4.07 at midmorning. Sprint's shares were down 16 cents, or 1.2%, at $12.96.

The response stems from charges by iPCS, one of Sprint's 10 national wireless affiliates, that Sprint failed to properly pass along revenue it collected from subscribers. Buckling under the weight of an estimated $430 million debt load, iPCS initiated bankruptcy proceedings on Sunday.

As part of the complaint iPCS filed in conjunction with its Chapter 11 filing, the carrier also said Sprint is obligated to purchase iPCS for up to 88% of its market value. One analyst estimated the value could be above $400 million.

iPCS was acquired by

Airgate PCS

(PCSA)

in 2001, and is one of 10 national affiliates that resell Sprint wireless services in areas the carrier doesn't serve. These affiliates currently serve about 2.5 million subscribers nationwide. iPCS has just under 240,000 subscribers.

In recent months, investors have grown concerned that Sprint will need to pony up cash to rescue its affiliate carriers as wireless subscriber growth sputters. Meanwhile, Sprint PCS continues to struggle with its own $15 billion debt load and a problem with deadbeat customers. Late last year it logged one of the industry's first quarterly subscriber losses. By the fourth quarter, the company has shown early signs of recovery.

Wilinsky said services in the iPCS regions aren't expected to be interrupted.