iPCS Suit Threatens Sprint & Clearwire (S, IPCS, CLWR)

Sprint Nextel Corp. (NYSE: S) already has issues coming up over its WiMAX scenario, and this could have long-term implications on all parties involved.  This isn’t even about earnings either.

The Clearwire Corporation (NASDAQ: CLWR) $14.5 billion venture with Sprint Nextel Corp. (NYSE: S) announced last week to form the first national WiMAX network is already getting some play in the legal system.  iPCS (NASDAQ: IPCS), the largest and one of the remaining only Sprint affiliates, has had issues with Sprint in the past about exclusivity agreements and this transaction prompted another lawsuit.

Anticipating an iPCS lawsuit, last Wednesday Sprint asked courts for judgment declaring that the venture will not violate exclusivity agreements with iPCS because the WiMAX network uses a different frequency.  Unfortunately it leaves many affiliate stores potentially in the lurch.

This morning, three iPCS subsidiaries are suing Sprint Nextel over the Clearwire transaction and consequential breaches of contractual agreements. iPCS noted believes that the transaction between WiMax and Clearwire breaches exclusivity provisions with Sprint. Additionally, iPCS sued Sprint because its failure to adhere to court judgments over the Sprint merger with Nextel in which the courts ruled that Sprint Nextel must cease owning, operating, and managing the Nextel networks iPCS territory.

This morning, Sprint Nextel reported earnings showing a loss of $505 million after losing 1 million customer to other carriers.  This suit is in reality a bad situation for all three parties.  Sprint’s issues of of stinking up Wall Street are not the fault of iPCS, but this is still iPCS’s problem.  The company sells Sprint Nextel exclusively in 81 markets and it has 640,600 subscribers out of an available population it lists as about 12 million residents being inside the existing coverage network.. 

iPCS is up over 6% to $28.88 in early afternoon trading. The 52-week range is "approximately $17.50 to $37.60.  Sprint Nextel is down almost 1% at $9.60 with a 52-week range of $5.48 to $23.42.  Clearwire is down over 9% to $12.78 with a 52-week range of $10.10 to $35.41.

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Jon C. Ogg
May 12, 2008