Sprint, Nextel Reach Tentative Deal

Is this good or bad for employment in Kansas City, hard to tell.

Content from the Wall Street Journal

By DENNIS K. BERMAN and JESSE DRUCKER
Staff Reporters of THE WALL STREET JOURNAL
December 10, 2004 4:09 p.m.

Sprint Corp. and Nextel Communications Inc. have tentatively agreed to economic terms of a merger of equals that would create a third giant cellular carrier with nearly 39 million subscribers, said a person familiar with the matter.

The talks, characterized as advanced negotiations, could still fall apart, but if things stay on track, a deal could be announced soon. Those terms will pay Nextel shareholders the equivalent of 1.3 shares of Sprint stock, with a small cash element in order to ensure that current Sprint shareholders have more than 50% of the combined company.

That is important, this person says, because the combined company, post-closing, will be spinning off Sprint's local-phone carrier. This new spin-off will maintain its headquarters in Overland Park, Kan.

Current Sprint Chief Executive Gary Forsee will continue to serve in that role at the new, largely wireless company, which will be called Sprint-Nextel. Nextel Chief Executive Timothy Donahue would serve as executive chairman of the new company. The company would have a 50-50 split among board members.

The company will have a corporate headquarters in Reston, Va., where Nextel is currently based, with an operating headquarters in Overland Park, Kan., where Sprint is currently based.




Timothy Burger

Pin Drop?

The rumor mill is running on Wall Street, and right now it is milling over Kansas City. The current rumor is that a deal between Sprint and Nextel is in the works. What does this mean, I don't know, in fact nobody knows. So far neither company has commented on the rumor, but every time Sprint sneezes all of Kansas City thinks it is coming down with a cold.

There are a lot of ways this deal could work out, unfortunately a lot of them could be bad for Kansas City. The reasoning for the deal seems kind of weak, but that doesn't mean that it won't happen. Sprint is the third largest wireless carrier in the United States, Nextel is number five. However Nextel has the highest per customer revenue in the industry, for some reason people, specifically businesses, pay more for those irritating beeping walkie-talkie phones.

While this deal would supposedly be a "merger of equals", in most cases one company is a little more equal, and the jobs end up on their corporate campus. Sprint is one of about five to ten reasonably sized companies that call Kansas City home and the loss of Sprint revenue would be a disaster for Kansas City.

However there are a lot of reasons this deal might not happen including the terrible quality of the current Nextel network and the fact that Nextel is planning on building a new network in the next couple of years because public services will be getting the radio band that Nextel currently uses. This means that Nextel doesn't bring any network assets to the deal, it also means that Nextel will be forced to use a new (unproven) radio technology for their push to talk feature, a feature that Verizon is already copying and Sprint already has plans to copy. This may mean that some of their lucrative business customers may be up for grabs.

After all, who knows maybe Sprint will end up the "more equal" of the two and this will be a good thing, I guess we will just have to keep our ear to the rumor mill to see how this one turns out.

Timothy Burger

Hold His Feet to the Fire

During the 2004 election campaign Representative Dennis Moore frequently told voters that he supports the President when he agrees with the President, he told voters he was a pragmatic moderate, he said he was in favor of bi-partisan solutions and he claimed that he was interested in insuring the solvency of the Social Security System.

It is time for Dennis Moore to keep his word on all of those promises. Today Democrat Representative Allen Boyd came out in favor of President Bush's efforts to reform Social Security. Representative Boyd is the first Democrat to reach across party lines to help the President develop a bi-partisan solution to prevent Social Security from going bankrupt. As you may expect Democrats are already attacking Rep. Boyd for breaking party lines.

Social Security is a looming disaster for all Americans, especially those who depend on the system for a large portion of their living expenses and younger workers who will be forced to pay higher taxes in the future to fund the Social Security deficit.

As one of Representative Moore's constituents, I would like to officially call for him to support the President in developing a bi-partisan solution to the emerging crisis in Social Security. He has claimed to be a moderate, and claimed to be a fiscal conservative. It is time for Dennis Moore to make his campaign promises mean something. Many of us have been disappointed as Moore has built a rather liberal record in his six plus years as our Representative.

Now we must hold his feet to the fire, make sure that he knows how his constituents feel, and make him get behind a real solution. Call Dennis Moore ((202) 225-2865), write a letter to the Star, whatever, but we need to make this an issue or Moore will be able to play politics with the issue. Every election cycle we complain that people don't understand just how liberal Moore is, well now is the time to teach them. I will be calling Moore's office tomorrow morning and I encourage you to also.

This issue is important to me, I will be posting followup so let me know if you hear anything at timothyb(at)timothyburger.com

Timothy Burger