Sprint Acquires Nextel In $35 Billion Deal

The widely rumored transaction, announced Wednesday, would create a company called Sprint Nextel with about $40 billion in combined yearly revenue and more than 35 million wireless subscribers, trailing only industry leaders Cingular Wireless and Verizon Wireless.

Sprint would get access to Nextel's 15.3 million subscribers, many of whom are business customers, and Nextel would avoid a costly upgrade of its own network. The companies estimated the merger would save them $12 billion in operating costs and network upgrades.

The combination comes as the cost of wireless calls continue to drop and the industry begins to look like the long-distance business looked five years ago: Three big competitors constantly undercutting each other's prices.

After completion of the deal, which the companies described as a merger of equals, Sprint's local telecommunications business would be spun off to the combined firm's shareholders. The local telecom business accounted for about $6 billion of their combined revenues.

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Sprint Nextel will have its executive headquarters in Reston, Va., where Nextel is now based and its operational headquarters in Overland Park, Kan., where Sprint has its headquarters.

Sprint chairman and chief executive Gary D. Forsee will become president and CEO of Sprint Nextel, and Timothy M. Donahue, currently president and CEO of Nextel, will become chairman of the new company.

The new company's board would consist of 12 members with six from each company.

"This merger positions Sprint Nextel for greater success than either company could have achieved alone," Forsee said in a statement.

Sprint currently ranks as the nation's third-biggest wireless company as well as the third-largest in long-distance service. Nextel ranks fifth in U.S. wireless service.

Nextel agreed last month to move its network to a more expensive band of broadcast spectrum because of fears of interference between its phones and emergency response radios.

Now, according to a press release from the companies, Sprint's next-generation technology will be used for the combined network.

After the takeover, the three largest wireless companies will carry about 75 percent of traffic, according to telecom analyst Jeff Kagan.

At the top is Cingular Wireless, a joint venture between BellSouth and SBC Communications that recently completed the $41 billion acquisition of AT&T Wireless. No. 2 Verizon Wireless is a joint venture owned by Verizon Communications and Vodafone Group, the world's largest mobile-phone operator.

Under terms of the deal, Sprint shareholders would get one share of the new company for each Sprint share while Nextel shareholders would get the equivalent of 1.3 Sprint Nextel shares for each of their shares.

At today's rates, each Nextel share would be exchanged for 1.28 Sprint Nextel shares and 50 cents in cash.

The exact breakdown for Nextel shareholders will be determined later, but the cash payment won't exceed $2.8 billion.

In premarket trading Wednesday, Sprint shares rose 5 cents to $25.15 and Nextel shares rose 49 cents to $30.48.

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