August 31, 2005

Just days ahead of beginning a new marketing campaign, Sprint Nextel Corp. said it planned to acquire a pair of network affiliates: IWO Holdings Inc. and Gulf Coast Wireless Ltd. for more than $700 million.

The deals will add more than 330,000 direct customers to Sprint Nextel's operations and stop pending litigation between Gulf Coast Wireless and Sprint Nextel.

Sprint Nextel said it acquired IWO Holdings for $427 million, including the assumption of $208 million in debt. IWO Holdings' shareholders will receive $42.50 per share in cash, with the deal expected to close during the fourth quarter.

IWO Holdings' stock was trading up more than 16 percent early Tuesday at $41.50 per share, representing a market capitalization of $207.5 million.

Sprint Nextel noted the transaction value represents 10.8 times earnings before interest, taxes, depreciation and amortization adjusted for the impact of special items for the 12 months ending June 30 and 8.5 times 2006 adjusted EBITDA.

IWO Holdings, which was spun off from fellow affiliate US Unwired Inc. earlier this year following IWO Holdings' reorganization filing, serves more than 237,000 subscribers and covers about 4.8 million potential customers in portions of New York, New Hampshire, Vermont, Massachusetts and Pennsylvania.

Sprint Nextel said it was acquiring privately held Gulf Coast Wireless for $287.5 million, including the assumption of debt. Gulf Coast currently serves 95,000 direct customers in southern Louisiana and Mississippi, with the deal expected to close during the fourth quarter.

Sprint Nextel added that the transaction value represents 9.2 times EBITDA for the 12 months ending June 30 and 8.1 times 2006 EBITDA.

As part of the agreement, Gulf Coast Wireless and Sprint Nextel said they will seek an immediate stay of litigation that was pending in the U.S. District Court in Middle District of Louisiana.

The litigation originally was filed by Gulf Coast Wireless in July. The lawsuit claimed Sprint Corp.'s acquisition of Nextel Communications Inc. violated terms of its affiliate agreement.

Sprint Nextel acquired US Unwired Inc. earlier this month for $1.3 billion following similar violation claims. Analysts noted the US Unwired transaction represented 14.2 times 2005 EBITDA and 10.9 times 2006 EBITDA results.

Sprint Nextel also has announced agreements with affiliates iPCS Inc. and its subsidiaries Horizon Personal Communications Inc. and Bright Personal Communications Services L.L.C., giving the companies until Jan. 1 to work out potential modifications to their affiliate agreements.

Sprint Nextel affiliate AirGate PCS Inc., which was acquired earlier this year by Sprint Nextel's largest affiliate Alamosa Holdings Inc., filed a similar complaint against Sprint Nextel earlier this month.

Sprint Nextel also announced earlier this month that it intended to pursue an appraisal process under affiliate Nextel Partners Inc.'s "put" option instead of moving forward with a negotiated acquisition.

Nextel Partners has said it would recommend its shareholders initiate the "put" option following Sprint's acquisition of Nextel.

The "put" option requires Sprint Nextel to purchase the 68 percent of Nextel Partners it does not already own at "fair market value" plus a "put premium." Nextel Partners' current market capitalization is around $7 billion.

Source: RCR News