Rural telecommunications provider and Sprint Corp. wireless affiliate Shenandoah Telecommunications Co. said it has entered into a forbearance agreement with Sprint related to Sprint’s pending acquisition of Nextel Communications Inc.
Shentel said the agreement reflects the parties’ “desire to avoid litigation” while they renegotiate terms of Shentel’s current affiliate agreement, which will be violated by Sprint’s acquisition of Nextel that is scheduled to close Friday.
Terms of Shentel’s forbearance agreement are similar to an agreement reached between Sprint and affiliate UbiquiTel Inc. last week. Those terms include several provisions designed to protect Shentel’s CDMA customer base from competing iDEN services that will be offered by Nextel in Shentel’s service area.
The terms include tight control on the availability of iDEN or Nextel promotional material both online and in retail locations and prevents the Sprint name or any signature of the company from appearing on any iDEN products sold in Shentel’s service area. The agreement also prevents Sprint from sharing Shentel’s billing and subscriber records, customer care and migration services, and network performance reports with Nextel.
Sprint also said it will not offer dual-mode CDMA/iDEN handsets in Shentel’s service areas unless the CDMA portion of the handset is programmed to use Shentel’s network on a first-priority basis over the iDEN network in its service areas. Sprint also agreed to not use Nextel’s network or spectrum, including the G block 1.9 GHz spectrum Nextel is receiving from the Federal Communications Commission as part of its spectrum realignment plan, in Shentel’s service areas in order to offer CDMA services.
In addition, the agreement calls for Nextel affiliate Nextel Partners Inc. to adhere to terms of the deal should Sprint gain a controlling interest in Nextel Partners. Nextel currently controls 32 percent of its affiliate, which has recommended that its shareholders exercise their put option following Sprint’s acquisition of Nextel, forcing Nextel to acquire the remaining interest in Nextel Partners that it does not already own.
Sprint affiliate Alamosa Holdings Inc. reported earlier this week that its recently acquired subsidiary AirGate PCS Inc. filed a complaint against Sprint and Nextel in connection with Sprint’s pending acquisition of Nextel.
The complaint alleges that the acquisition will breach exclusivity covenants of AirGate’s affiliate agreement, and that Nextel unlawfully interfered with AirGate’s exclusive rights under its affiliate agreements. AirGate’s complaint seeks an order directing Sprint and its affiliates to uphold their agreements with AirGate; an injunction preventing Sprint and Nextel from taking any action or entering into any agreements that would violate AirGate’s exclusivity covenants; a judgement declaring rights, remedies and obligation of the parties under the agreements; and unspecified damages.
Alamosa, which is Sprint’s largest wireless affiliate with nearly 1.5 million customers, added that while it has been in discussions with Sprint in an attempt to resolve the issues raised by its pending acquisition of Nextel, it said “it is unlikely that the parties will be able to reach a mutually acceptable agreement prior to the closing of the merger.”
Analysts have noted that AirGate’s affiliate agreement with Sprint is the most exclusive among the affiliates as it prevents Sprint from offering any wireless service in AirGate’s service area regardless of spectrum used. The other affiliate agreements prevent Sprint only from offering service using the 1.9 GHz spectrum band.
Sprint reported late last month an agreement with wireless affiliates iPCS Inc., Horizon Personal Communications Inc. and Bright Personal Communications Services L.L.C. under which the affiliates would not seek injunctive or equitable relief against Sprint or Nextel in exchange for Sprint not revealing operational information about the affiliates to Nextel.
The iPCS agreement calls for Sprint to modify its branding campaign in the affiliates’ markets and gives the companies until Jan. 1 to work out any potential modifications to the affiliate arrangements.
Sprint announced last month that it was acquiring disgruntled affiliate US Unwired Inc. for $1.3 billion. Both companies were in the midst of court proceedings brought by US Unwired against Sprint claiming the pending acquisition of Nextel would violate portions of its affiliate agreement.
