UBS: iDEN Sale on the Table
There has been constant chatter about the possibility of an iDEN sell-off as Sprint's fortunes have declined over the last six months or so. Sprint, which already operates a nationwide CDMA network, acquired the iDEN network as part of its 2005 merger with Nextel, and many still regard the walkie-talkie messaging capability offered over iDEN as the best in the business. (See Lessons From Nextel.) UBS analyst John Hodulik revitalized talk of an iDEN sell-off Friday afternoon with a research note suggesting that Sprint would have to "renegotiate with the banks" or "sell additional assets" following the withdrawal of its $3 billion private placement of preferred stock. (See Sprint Cancels Placement.)
"Despite the difficulties in a separation, we do believe the company is shopping the iDEN business," writes Hodulik. "However, at this point we don’t know what assets are included in the proposed sale, the Ebitda it generates, or the debt that goes with it, making an analysis of a transaction difficult."
One of the areas that new Sprint CEO Dan Hesse wants to revitalize is the carrier's iDEN business. However, even he didn't rule out the possibility of a sale Wednesday (Aug. 6) during the company's second-quarter conference call. "Every option is on the table, and every option will continue to be considered," he said on the call.
One big question remains, however: What carrier or company would buy the Nextel iDEN network? It doesn't fit AT&T Inc. (NYSE: T) or Verizon Wireless technology and is not really suitable for the high-speed data transitions that most other technologies are moving toward. There has been some suggestion that iDEN could serve as a public safety network in the U.S. but there's no solid word on how a sale would be financed. (See Nextel-Sprint: Winners & Losers and Wireless Challenge Remains After 9/11.)
Analyst Hodulik simply says that it is "difficult to assess the probability that the company can sell the business on attractive terms."
— Dan Jones, Site Editor, Unstrung