Las Vegas Business Press :: News : Sprint spin off could become sell off

Sprint spin off could become sell off

BY VALERIE MILLER
BUSINESS PRESS

Sprint Nextel's recently announced decision to spin off its traditional land-line operations into a separate company could be the first step in the division's eventual sale as millions of people, especially consumers younger than 30, increasingly turn to wireless phones rather than the century-old phone-to-wall technology, industry experts said.

Telecommunications industry analysts said the move may have been largely motivated by fears on the part of Sprint Nextel executives that the old technology is dragging down the company's stock price.

"Most people who own Sprint stock want growth, and land-line stock isn't growing," said SG Cowen financial analyst Thomas Watts.

Sprint technician Robert Delgado repairs a land line for a customer in the Red Rock Country Club community. Experts expect that the land line business will decline in the coming years.

Sprint Nextel stock has been trading at about $26 a share in recent days. Its 52-week high of $27.20 was recorded on August 12. Its 52-week low of $19.11 came on September 13.

A local Sprint Nextel spokeswoman denied talk of a sale of the old-line operations, which would operate in 18 states under the name of LTD Holding. The plan awaits regulatory approval in each of the 18 states, including Nevada. It has already been OK'd by federal regulators.

Local Sprint spokeswoman Vicki Soares said all segments of the company are performing well, particularly through Sprint's efforts to bundle a mix of traditional and wireless phone and data services.

She noted that there never have been plans to sell the land-line business, which has 900,000 access lines in Southern Nevada.

"The bundle services we offer, that enhances the value of both the company and the customer," Soares said. "We are able to bundle it at an attractive rate to the customer. No other company can do what we do."

Sprint Nextel filed its application with Nevada's Public Utilities Commission on August 23, asking for an expedited approval of the plan. The spinoff would not come until some time next year, Sprint executives said. The utilities commission has not decided whether to grant Sprint's request for an expedited hearing.

But a PUC ruling could be issued as soon as October, according to representatives of the state Attorney General's Bureau of Consumer Protection, which is waiting to see how corporate assets would be divided between Sprint's land-line operation and wireless division, said Jim Polito, the state bureau's senior economist.

"At this stage we really need to examine their filing more closely," he said.

The spinoff was expected by many within the telecommunications industry, with some saying that Sprint will eventually sell LTD Holding.

"Everybody's known about this for ages. They put (the overall company) up for sale and there were no takers at the price they wanted," said Frank Dzubeck, the president of Network Communications Architects, a Washington, D.C.-based communications consulting company. "For this to happen the way it happened, it is pretty obvious."

Telephone giant Verizon is considering a similar move, explained SG Cowen's Watts.

"The local business will be spun off to the shareholders so if somebody wanted to buy it it will be straightforward," said Watts, who monitors Sprint's operations.

Overland Park, Kan.-based Sprint purchased Virginia-based Nextel in December for $35 billion. Sprint employs about 1,300 people in Southern Nevada, with the vast majority in the land-line operation. Sprint has 7.5 million access lines in 3,000 communities in 18 states, which account for $6 billion in annual revenue.

Sprint executives said they expect the spinoffs to be completed within nine to 12 months, according to the company's recently released third-quarter report. The 18 local operations are expected to carry debt totaling $7.25 billion.

Network Communications Architects' Dzubeck said that competition from cable TV companies are a part of the problem for land-line providers.

Locally, Cox Cable is preparing to roll out its own digital phone service. Cox Vice President Steve Schorr said his company will use its existing cable lines that stretch into homes and businesses throughout the Las Vegas Valley. Like Sprint, Cox owns the last mile of lines leading to the customer's home or business.

Also on the horizon: Operators of the popular Internet search engine Google could enter the fray, providing Internet phone service to tens of millions of people.

"By 2010, it will be the cable companies and wireless companies' worst nightmare," Dzubeck predicted.

vmiller@lvpress.com | 702-871-6780 x331

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