OVERLAND PARK, Kan. & RESTON, Va.--(BUSINESS WIRE)--Dec. 15,
2004--Nextel Communications, Inc. (NASDAQ: NXTL):
-- New company will have superior growth profile, unmatched asset
mix, strong margins and highly valuable wireless customer base
-- Will have both national wireless and global IP networks; be
competitively well positioned to meet growing demand for
bundled and integrated communications solutions
-- Unprecedented opportunity to deliver true IP-based wireless
-- Sprint's local telecommunications business expected to be spun
off to shareholders of the new company
Sprint (NYSE: FON) and Nextel Communications, Inc. (NASDAQ: NXTL)
today announced that their boards of directors have unanimously
approved a definitive agreement for a merger of equals. The
combination will create America's premier communications company -- a
leading wireless carrier augmented by a global IP network that will
offer consumer, business and government customers compelling new
broadband wireless and integrated communications services. The new
company, which will be called Sprint Nextel, also intends to spin off
to its shareholders Sprint's local telecommunications business
following the merger.
Sprint and Nextel currently have a combined total equity value of
approximately $70 billion and serve more than 35 million wireless
subscribers on their networks and 5 million additional subscribers
through affiliates and partners. The two companies, along with their
affiliates and partners, operate networks that directly cover nearly
262 million people, more of the U.S. population than any other
The new company will have a balanced mix of consumer, business and
government customers, as well as a strong spectrum position. Sprint
Nextel will be well positioned in the fastest-growing areas of the
telecommunications industry, including mobile data and push-to-talk
services, where Sprint and Nextel are innovators in technology. With
Sprint's global Internet network, the new company will be positioned
to provide differentiated communications solutions through integrated
applications for business and government and new broadband wireless
services for consumers.
Sprint Nextel is expected to have the highest average revenue per
user (ARPU) in the wireless industry and to be positioned to lead the
industry in sustainable revenue growth. Total pro forma revenues for
the four quarters ended September 30 for Sprint Nextel were
approximately $40 billion, which includes approximately $6 billion in
revenues generated by the local telecommunications business.
Sprint and Nextel are being valued equally in the merger and their
shareholders will each own approximately 50 percent of the new company
after the merger. Existing Sprint shares will remain outstanding and
each Nextel common share will be converted into new company shares and
a small per share amount of cash, with a total value equal to 1.3
shares of Sprint Nextel common stock. The exact stock/cash allocation
will be determined at closing of the merger in order to facilitate the
spin-off of the local telecommunications business on a tax-free basis.
The aggregate amount of the cash payment will not exceed $2.8 billion.
If the stock/cash allocation was calculated today, it is estimated
that Nextel shareholders would receive about 1.28 Sprint Nextel shares
and about $0.50 in cash for each Nextel share.
A highly experienced management team will lead the new company.
Gary D. Forsee, currently chairman and chief executive officer of
Sprint, will become president and chief executive officer of Sprint
Nextel. Timothy M. Donahue, currently president and chief executive
officer of Nextel, will become chairman of the new company. Together
they have a proven track record of leadership and nearly six decades
of industry experience. Len Lauer, currently president and chief
operating officer of Sprint, will serve as chief operating officer of
the new company, and Paul Saleh, currently Nextel's executive vice
president and chief financial officer, will serve as chief financial
officer of Sprint Nextel. Tom Kelly, executive vice president and
chief operating officer at Nextel, will become the new company's chief
strategy officer. Barry J. West, Nextel's executive vice president and
chief technology officer, will serve as its chief technology officer.
Leading the transition teams and serving as co-chief transition
officers will be Steve Nielsen, senior vice president - finance at
Sprint, and Richard Orchard, Nextel's senior vice president and chief
The Sprint Nextel Board will consist of 12 directors, six from
each company, including two co-lead independent directors, one from
Sprint and one from Nextel.
Sprint Nextel will have its executive headquarters in Reston, Va.,
and its operational headquarters in Overland Park, Kan. The new
company's common stock will be listed on the New York Stock Exchange.
The merger is expected to close in the second half of 2005 and is
subject to shareholder and regulatory approvals, as well as other
customary closing conditions.
"This merger positions Sprint Nextel for greater success than
either company could have achieved alone," said Gary Forsee. "The
combination of Sprint and Nextel builds strength on strength. It will
be a dynamic next-generation communications company, the provider of
choice for businesses, government and consumers, and the only U.S.
primarily wireless investment opportunity. Nextel is recognized as a
leader in profitability, customer loyalty, revenue per customer, push
to talk and marketing to businesses and government. Sprint excels in
the consumer business and in providing advanced wireless data services
and global IP voice and data networks. Together, we will be positioned
to provide the high-value, integrated communications solutions
customers increasingly demand."
"We are confident that Sprint Nextel will generate efficiencies
that will benefit customers, shareholders and employees. The new
company will capitalize on its leadership position in key growth
areas, unmatched asset mix, clear technology migration path, brand
strength, innovative products and services and talented employees,"
said Tim Donahue. "We share compatible cultures built on traditions of
innovation and competitiveness. We will have the resources to develop
and deploy compelling, differentiated services by unleashing the
combined strengths of the two companies, each of which is recognized
as a product and network innovator. This is a pro-competitive
combination that will provide customer choice and create exciting new
opportunities for all of our constituencies."
Overview of Synergies
The combined Sprint Nextel is expected to deliver operating cost
and capital investment synergies with an estimated net present value
of more than $12 billion. These synergies will be derived primarily
-- Saving network operating expenses by reducing the number of
cell sites and switches.
-- Reducing overall capital expenditures by extending the
advantages of Sprint's current deployment of next-generation
EV-DO technology to the combined customer base, including
migration of Nextel's push to talk services to CDMA.
-- Migrating Nextel backhaul and other telecommunications traffic
to Sprint's long haul infrastructure.
-- Optimizing customer care, billing and IT costs by
consolidating operations, infrastructure support costs and
overhead while maintaining high quality services.
-- Reducing combined sales and marketing costs.
-- Lowering overall general and administrative costs.
-- Reducing network capital expense after the merger by building
a true IP-based multimedia network.
In addition to scale efficiencies, customers and shareholders are
expected to benefit from revenue synergies derived from extending the
scope of existing and future services to a larger customer base.
Robust Network Capabilities
Sprint Nextel will have a clear technology migration path and
valuable and extensive network and spectrum assets. The new company
will have robust wireless network capabilities, including Nextel's
current nationwide 800MHz/iDEN network, Sprint's national 1.9GHz/CDMA
network and Sprint's nationwide deployment of wireless EV-DO. Sprint
Nextel's plans include migrating over time Nextel services, including
push to talk service, to Sprint's CDMA EV-DO network. Sprint Nextel
will have the capability to deploy new services on the two companies'
2.5GHz combined spectrum holdings that together cover 85 percent of
the households in the top 100 markets. Sprint Nextel will also utilize
Sprint's nationwide fiber optic wireline network which extends to 60
metropolitan networks and 37 international fiber points of presence.
These combined capabilities are expected to make Sprint Nextel a key
partner for the largest content providers, systems integrators, mobile
virtual network operators and other new telecommunications entrants to
jointly offer the full portfolio of consumer services - voice, data,
video, wireline, and wireless - and customized enterprise applications
and integrated solutions for business.
Sprint Nextel's anticipated deployment of new innovative products
will provide additional choices for customers and enable the company
to vigorously compete in the marketplace.
For customers, this combination will allow Sprint Nextel to:
-- Offer digital wireless service in all 50 states, Puerto Rico
and the U.S. Virgin Islands. Sprint Nextel and its affiliates
and partners cover a total domestic population of 262 million.
-- Provide consumers more choice through investments in wireless
multi-media, web browsing, messaging, gaming and music on the
-- Provide robust integrated wireless and IP-based wireline
solutions to business.
-- Improve customer service and sales performance through joint
-- Invest to deploy next-generation wireless data services,
bringing new and compelling products to market to benefit
consumers and businesses.
-- Cost effectively invest to improve wireless network quality
Affiliates and Partners
Through its relationship with independent PCS affiliates, Sprint
has expanded its wireless footprint into certain areas of the United
States. These Sprint affiliates currently serve more than 3 million
subscribers. Sprint expects to engage in discussions with the PCS
affiliates regarding those relationships in light of the combination
with Nextel in order to achieve a mutually beneficial outcome.
The merger may also trigger certain share purchase rights in
Nextel's agreement with Nextel Partners Inc., a provider of digital
wireless communications services under the Nextel brand name in
mid-sized and tertiary U.S. metropolitan areas. Nextel owns about 32
percent of Nextel Partners outstanding stock. The agreement specifies
a process that defines the timing for the exercise of those rights by
Nextel Partners and for determining a price, which is predicated on
fair market value at the time the purchase right triggers, under which
Nextel would purchase the Nextel Partners shares it does not own.
Sprint Nextel will analyze this at the appropriate time in the context
of the merger process. In certain circumstances, the process for
determining the purchase price under which Nextel would acquire the
Nextel Partners shares would extend for a substantial period of time
after completion of the merger.
Spin-Off of Local Telecommunications: A Stronger Future
Following the close of the merger, Sprint Nextel intends to
separate Sprint's local telecommunications business, including
consumer, business and wholesale operations from its other businesses
and then spin this separated company off to the Sprint Nextel
shareholders in a transaction that is expected to be tax free. The
inclusion of Sprint's North Supply business in the spin-off will be
determined at a later date.
The local telecommunications business will have its own management
team and board of directors, consisting of an equal number of
designees from Sprint and Nextel. The local telecommunications
business, which has 7.7 million local access lines in 18 states and
had revenues of more than $6 billion over the past four quarters, will
be the largest independent local telephone company in the United
States. It will have commercial operating relationships with Sprint
Nextel for mobile and long-distance network services and will receive
certain transitional services, including corporate support functions.
Its corporate headquarters will be in Kansas City. Completion of the
spin-off is subject to certain conditions, including regulatory
approvals. Following the spin-off, its common stock is expected to be
listed on the New York Stock Exchange.
"Sprint's local telephone operation has a long history of strong
financial performance," Forsee said. "It operates in some of the
fastest growing areas in the United States, and has been an innovative
leader in the development and sale of bundled service offerings. With
its strong management team and employee base, it is well positioned to
meet the needs of its customers."
Sprint expects to continue to pay dividends at current levels
through the closing of the merger. The spun off local
telecommunications business is expected to pay quarterly dividends
consistent with its financial prospects. Following the completion of
the merger and until completion of the spin-off, it is contemplated
that Sprint Nextel will pay a reduced quarterly dividend to
shareholders in amounts consistent with the dividends that the
spun-off local telecommunications business expects to pay. Following
completion of the spin-off, it is anticipated that Sprint Nextel will
cease paying dividends.
Information about Today's Meeting and Conference Call for the
A meeting and conference call to discuss the transaction will be
held this morning at 9:00 a.m. EST/8:00 a.m. CST. Gary Forsee and Tim
Donahue will make a presentation and take questions at the St. Regis
Hotel, 2 East 55 Street, New York. For dial-in access to the meeting
call one of: 1-816-650-0895, 1-816-650-0900, 1-866-311-1391, or
1-866-262-9306 with the passcode 34018148. The call will also be
available via webcast, accessible at www.sprint.com or www.nextel.com.
Satellite information for transmission of today's meeting:
Satellite - Galaxy 11
Transponder - 15
Orbital Slot - 91 Degrees West
Downlink Frequency - 12003 Mhz (Horizontal) Audio Subcarriers -
B-roll footage will also be available immediately preceding and
following the transmission of the meeting.
A slide presentation and live audio webcast of the call, as well
as other facts and information related to the transaction, will be
available and archived at www.sprintnextel.mergerannouncement.com
Sprint is a global integrated communications provider serving more
than 26 million customers in over 100 countries. With more than $26
billion in annual revenues in 2003, Sprint is widely recognized for
developing, engineering and deploying state-of-the-art network
technologies, including the United States' first nationwide
all-digital, fiber-optic network and an award-winning Tier 1 Internet
backbone. Sprint provides local communications services in 39 states
and the District of Columbia and operates the largest 100-percent
digital, nationwide PCS wireless network in the United States.
Nextel, a FORTUNE 200 company based in Reston, Va., is a leading
provider of fully integrated wireless communications services and has
built the largest guaranteed all-digital wireless network in the
country covering thousands of communities across the United States.
Today 95 percent of FORTUNE 500 companies are Nextel customers. Nextel
and Nextel Partners Inc. currently serve 297 of the top 300 U.S.
markets where approximately 259 million people live or work.
Sprint's financial advisors for the transaction were Lehman
Brothers Inc. and Citigroup Global Markets Inc.; its principal legal
advisors were Cravath, Swaine & Moore LLP and King & Spalding LLP.
Nextel's financial advisors were Goldman Sachs & Co., Lazard Freres &
Co. and JP Morgan Securities Inc., and its principal legal advisors
were Jones Day and Paul, Weiss, Rifkind, Wharton & Garrison.
Forward Looking Statements
A number of the matters discussed in this press release that are
not historical or current facts deal with potential future
circumstances and developments, in particular, information regarding
the new company, including expected synergies resulting from the
merger of Sprint and Nextel, combined operating and financial data,
future technology plans and whether and when the transactions
contemplated by the merger agreement will be consummated. The
discussion of such matters is qualified by the inherent risks and
uncertainties surrounding future expectations generally, and also may
materially differ from actual future experience involving any one or
more of such matters. Such risks and uncertainties include: the
failure to realize capital and operating expense synergies; the result
of the review of the proposed merger by various regulatory agencies,
and any conditions imposed on the new company in connection with
consummation of the merger; approval of the merger by the stockholders
of Sprint and Nextel and satisfaction of various other conditions to
the closing of the merger contemplated by the merger agreement; and
the risks that are described from time to time in Sprint's and
Nextel's respective reports filed with the SEC, including each
company's annual report on Form 10-K for the year ended December 31,
2003 and quarterly report on Form 10-Q for the quarter ended September
30, 2004 as such reports may have been amended. This press release
speaks only as of its date, and Sprint and Nextel each disclaims any
duty to update the information herein.
Additional Information and Where to Find It
In connection with the proposed transaction, a registration
statement on Form S-4 will be filed with the SEC. SPRINT AND NEXTEL
SHAREHOLDERS ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY
OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY
STATEMENT/ PROSPECTUS THAT WILL BE PART OF THE REGISTRATION STATEMENT,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER. The
final joint proxy statement/prospectus will be mailed to shareholders
of Sprint and shareholders of Nextel. Investors and security holders
will be able to obtain the documents free of charge at the SEC's web
site, www.sec.gov, from Sprint Investor Relations at Sprint
Corporation - Investor Relations, 6200 Sprint Parkway, Overland Park,
Kansas 66251 or call 800-259-3755, Option 1 or from Nextel Investor
Relations at Nextel Investor Relations 2001 Edmund Halley Drive,
Reston, Virginia 20191 or call 703-433-4300.
Participants In Solicitation
Sprint, Nextel and their respective directors and executive
officers and other members of management and employees may be deemed
to be participants in the solicitation of proxies in respect of the
merger. Information concerning Sprint's participants is set forth in
the proxy statement dated, March 16, 2004, for Sprint's 2004 annual
meeting of shareholders as filed with the SEC on Schedule 14A.
Information concerning Nextel's participants is set forth in the proxy
statement, dated April 2, 2004, for Nextel's 2004 annual meeting of
shareholders as filed with the SEC on Schedule 14A. Additional
information regarding the interests of participants of Sprint and
Nextel in the solicitation of proxies in respect of the merger will be
included in the registration statement and joint proxy
statement/prospectus to be filed with the SEC.
CONTACT: Sprint Media Contacts:
Nick Sweers, 913-794-3460
Bill White, 913-794-1099
Sprint Investor Contact:
Kurt Fawkes, 913-794-1126
Nextel Media Contact:
Audrey Schaefer, 240-876-1588
Russell Wilkerson, 703-932-5950
Nextel Investor Contact:
Paul Blalock, 703-433-4300