September 6, 2005

Nextel Partners Inc. lost its bid to stall Sprint Nextel Corp.'s national brand rollout as a three-member arbitration panel ruled Nextel Partners had not demonstrated a likelihood of success on the merits of its claim that the rollout breached its affiliate agreement.

Nextel Partners claimed its affiliate agreement was breached following Sprint Corp.'s acquisition of Nextel Communications Inc. Aug. 12.

The arbitration panel, which held a full-day hearing Aug. 25, rejected Nextel Partners assertion that its affiliate agreement required Sprint Nextel to either allow Nextel Partners to use the new Sprint logo or to sell Nextel iDEN products only under the Nextel brand and not under the new Sprint brand.

The panel also ruled that Nextel Partners would not be irreparably harmed by the rollout of the new Sprint brand.

Nextel Partners noted that the panel found that Nextel Partners likely would prevail on its claim that the use of the new Sprint-Nextel brand by Nextel's operating subsidiaries without making the new brand available to Nextel Partners violated the nondiscrimination provision of its affiliate agreement.

The panel added that Nextel Partners could be reimbursed financially for any loss of value during its "put" process associated with its inability to use the new Sprint-Nextel branding.

Nextel Partners' stock finished up 7 cents per share Tuesday at $25.92 per share.

Sprint Nextel said it was pleased with the panel's ruling, and it intends to continue to comply with its agreements with Nextel Partners. Sprint Nextel last week rolled out its new branding campaign that initially will not be seen in some of its affiliate markets pending resolutions to certain affiliate agreements.

Despite the setback, Nextel Partners still is expected to move ahead with another provision of its affiliate agreement that would require Sprint Nextel to acquire its affiliate.

Nextel Partners reported last month that more than 20 percent of its shareholders have requested that the carrier call a special meeting to vote on whether to exercise its "put right."

If approved, the "put right" would require Sprint Nextel to purchase the 68 percent of Nextel Partners it does not own currently for "fair market value" plus a "put premium" that would be determined through an appraisal process.

Nextel Partners' management previously stated it would recommend approval of the "put" option, which was triggered after Sprint acquired Nextel.

Analysts have predicted that Nextel Partners' "put" option and "put premium" could garner as much as $30 per share for Nextel Partners' shareholders. Nextel Partners' stock was trading at $26.40 per share early Thursday, giving the carrier a market capitalization of $7.12 billion.

Sprint Nextel said that it intends to pursue the appraisal process under Nextel Partners "put" provision instead of moving forward with a negotiated acquisition.

If initiated, Nextel Partners' "put" provision calls for both Sprint Nextel and Nextel Partners to appoint appraisers to determine the fair market value for Nextel Partners' stock.

If the appraisals are more than 10 percent apart, a third appraiser would be appointed to set a final value. Sprint Nextel has said the appraisal process could take up to four months to complete.

Source: RCR News