Another Headache For Sprint (S): Blocked Legal Appeal Vs. Small Affiliate iPCS (IPCS)

A tiny affiliate is proving to be a big nuisance for Sprint Nextel: The Illinois Supreme Court denied Sprint’s petition to appeal a 2-year-old ruling that bans Sprint (S) from selling Nextel walkie-talkie services in areas where its affiliate, iPCS, has exclusivity rights. Sprint now has 180 days to do the following, notes Goldman’s Jason Armstrong:

  • Keep its legal challenge going. (Not a “favourable option,” he notes.)
  • Stop selling Nextel service in iPCS territory, which includes parts of Illinois, Michigan, Pennsylvania, Indiana, Iowa, Ohio, and Tennessee. Armstrong notes this would affect “several hundred thousand” Nextel customers and put a big hole in Nextel’s network.
  • Work out a better deal with iPCS, which would cost Sprint money.
  • Buy iPCS. (Market cap: $390.5 million.)

The market seems to be betting on one of the latter two: iPCS (IPCS) shares are up 13% today to $22.77. And there’s a solid precedent: Sprint has purchased other affiliates in the past to fix these types of problems.

One hitch: It’s possible Sprint could ditch Nextel altogether in the near future. Sprint Nextel CEO Dan Hesse has repeatedly said that he’d consider selling the underperforming walkie-talkie business, and Sprint is even launching a second walkie-talkie service that uses a different network. Earlier this year, Sprint wrote down $30 billion of Nextel’s goodwill value from its $35 billion deal, which closed in 2005.

See Also:
More Evidence Sprint’s iPhone-Clone Samsung Instinct Isn’t A Dud
Sprint: Have A Question For Our CEO? Ask Some Tech Dude In Arizona!
Yet Another Huge Sprint Headache: Customers Who Hate It

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