Sprint final paper

Sprint final paper - Sprint Nextel Merger Overview Sprint...

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Sprint Nextel Merger Overview Sprint is a global communications company that offers a comprehensive range of wireless and wire line communications products and services. Nextel Communications, Inc was founded in New Jersey in 1987 and in 1996 it introduced Motorola's iDEN technology, which included dispatch radio, cell phones, data and text messaging into one phone. Nextel was one of the first cellular carriers to institute a nationwide, no roaming service charge. In our analysis we will discuss the Sprint Nextel merger, why it failed and the impact on financial performance. Growth in commercial wireless networks occurred primarily in the late 1980s and 1990s, and continued into the 2000s. The competitive nature of the wireless industry and the mass acceptance of wireless devices have caused costs associated with terminals and air time to come down significantly in the last 15 years. As a result, mobile users have reached almost 100% in countries like Taiwan, Italy, and Finland. Subscriber growth has been increasing by leaps and bounds; by mid 2002 the number of subscribers had already exceeded 1 billion worldwide. The sustained period of growth in the industry was followed by a period of consolidation. The market for wireless services has been and will continue to be characterized by intense competition on the basis of price, the types of services offered and the quality of service. Sprint Nextel competes with AT&T (formerly known as Cingular Wireless), Verizon Wireless and T-Mobile. Many of the large providers merged to remain competitive in the industry. Sprint and Nextel were both looking for a partner that would help them to continue to grow. On December 15, 2004 Sprint and Nextel announced a plan for a merger of equals forming the Sprint Nextel Corporation. The merger was valued at $36 billion with Nextel shareholders receiving a 9% premium. Existing Sprint shareholders would retain their shares and receive no premium. Existing Nextel shareholders would receive 1.28 shares in the new company along with a cash payout of $0.50 per share. Sprint merged with Nextel to secure a number of potential strategic and financial benefits. The merger was expected to result in operating cost and capital investment savings of $12 billion. The proposal received shareholder and regulatory approval in 2005 with the deal completed in August 2005. At the time of the merger Sprint was the third largest wireless phone
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company with 20 million subscribers while Nextel was the fifth largest with 15 million subscribers. The companies expect to add an additional 5 million subscribers through Nextel affiliates bringing the total subscribers of the new company to approximately 40 million. The combined company would retain its position as the third largest wireless company in the U.S. Management believes the merger is a good fit that will result in innovative products but there were concerns from the investment community. The two companies operate using different technologies and business models. Sprint utilized
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This note was uploaded on 06/22/2008 for the course ACCT 824 taught by Professor Cataldo during the Spring '08 term at Suffolk.

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Sprint final paper - Sprint Nextel Merger Overview Sprint...

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