Published on May 6th, 2008 | by Michael J Smith1
Sprint Considers Selling Nextel
The Wall Street Journal is reporting that Sprint Nextel Corp. is considering selling or spinning off the struggling Nextel unit.
In 2005, Sprint acquired Nextel for $35 billion. Since then, Nextel been losing subscribers steadily. In the 4th quarter, Sprint lost $29.5 billion thanks to a Nextel write down, which is when a company reduces the book value of an asset because it is overvalued compared to market value.
Since the merger, Sprint has lost two-thirds of its stock price because of Nextel’s struggles.
Now, Sprint is trying to figure out what to do with Nextel. It is considering selling Nextel to a private equity firm. It’s also considering spinning Nextel off into a spearate company.
Either way, getting rid of Nextel will help Sprint shed billions in debt. It would also put Sprint in position to expand its subscriber base. Nextel, which gets is phones exclusively from Motorola Inc., can’t really compete with the iPhone. But, Sprint has a better handset selection than Nextel, which may allow it to remain competitive.
Deutsche Telekom AG, the company that operates T-Mobile, is considering making a bid for Sprint. If it does, that could bring together the No. 3 and No. 4 U.S. carriers.
One other option is for Sprint to begin moving Nextel subscribers over to Sprint’s networks. Sprint recently began rolling out phones that offer the walkie-talkie feature that made Nextel so popular.
No word, yet, of what this means for NASCAR.