Class-action lawsuit claimed Sprint and executives falsified synergy claims
Sprint has reportedly agreed to pay a $131 million settlement on a class-action lawsuit that claimed the carrier and executives had defrauded investors going back to its $35 billion acquisition of Nextel Communications.
According to Reuters, the settlement resolves claims that former Sprint CEO Gary Forsee and other officials “fraudulently inflated the company’s stock and bond prices between October 2006 and February 2008.” The lawsuit claims Sprint had falsely claimed it would garner billions of dollars in savings from the combination of the nation’s No. 3 and No. 6 mobile operators.
Sprint at the time the deal was announced in late 2004, said the combination would deliver more than $12 billion in operating cost and capital investment savings through the reduction of cell sites and switches; a reduction in capital expenditures; migrating Nextel’s backhaul traffic to Sprint’s long-haul infrastructure; consolidated customer care, billing and information technology costs; reduced sales and marketing costs; and lower general and administrative costs.
However, Sprint struggled to integrate the Nextel assets, which included its iDEN network that garnered strong loyalty from business customers, but was incompatible with Sprint’s legacy CDMA operations. Sprint also had trouble keeping customers as it moved to tighten credit limits on its CDMA business to better align operations.
Forsee was eventually forced to resign in late 2007, bowing to shareholder pressure in the face of poor performance. Less than three years after the deal closed, Sprint was forced to write down $29.5 billion in losses tied to the deal.
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