This is not your traditional engagement. Months before Nextel Partners will likely be sold to a combined Sprint and Nextel Communications...
This is not your traditional engagement.
Months before Nextel Partners will likely be sold to a combined Sprint and Nextel Communications, the Kirkland company filed a lawsuit yesterday against its larger namesake.
The suit claims Nextel of Reston, Va., is violating a joint-venture agreement by not letting Nextel Partners in on branding, marketing, pricing and national-account discussions for what’s to be called Sprint Nextel.
Under the joint-venture agreement, Nextel Partners exclusively sells Nextel-branded products and services in rural and midsize cities for Nextel Communications. Sprint’s agreement to purchase Nextel Communications earlier this year triggered an option that allows Nextel Partners shareholders to sell the company to that new entity. A vote cannot happen until Sprint and Nextel Communications officially tie the knot, expected later this year.
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But yesterday, Nextel Partners explained in a filing about the lawsuit that communication hurdles may be contributing to prewedding jitters.
“Members of our management team have sought to discuss post-closing integration issues involving Nextel Communications and us,” wrote Nextel Partners in the Securities and Exchange Commission (SEC) filing. “Despite our efforts, we do not believe that they have complied with their obligations under these agreements.”
The concern is that decisions by Sprint and Nextel Communications may harm Nextel Partners’ business. But Nextel Partners said that if harm does occur, it should not be taken into account when determining a value for the company.
Nextel Communications declined comment yesterday, as did Sprint. Nextel Partners would not elaborate on the suit, filed in New York Supreme Court, except to refer to documents filed with the SEC.
In two filings, Nextel Partners listed items it said violated its original agreement, signed in 1999.
At the time, wireless entrepreneur Craig McCaw was trying to reorganize Nextel Communications and, as part of growth plans, McCaw asked John Chapple to start the company that came to be known as Nextel Partners. Chapple continues to be Nextel Partners chief executive.
The biggest sore point with Nextel Partners was Sprint and Nextel’s recent announcement about changes to the Nextel brand. Less than two weeks ago, Sprint and Nextel Communications said the combined company would designate Sprint as the main brand, with Nextel continuing as a key product brand.
That plan, Nextel Partners wrote, violates the joint-venture agreement if “we cannot use the same brand identity that Nextel Communications will use after the merger, i.e., the Sprint brand.”
Russell Wilkerson, a Nextel Communications spokesman, said: “We are very excited about our brands. … With respect to this issue [the suit], we are currently reviewing the documents.”
Beyond branding, Nextel Partners said it was trying to determine whether Sprint and Nextel Communications may be violating Nextel Partners’ exclusive rights to offer certain wireless services in its territory.
The lawsuit is asking for an injunction to keep business as usual while the dispute is settled through arbitration.
The original agreement designates a 37-day period for the companies to resolve the issues, but Nextel Partners is seeking arbitration immediately because it said it has been trying unsuccessfully to resolve the issues. The company added that it could not predict the timing of the court proceedings or the resolution process.
Nextel Partners, which is recommending to shareholders that it sell to Sprint Nextel, dismissed the idea that it was trying to stop the merger.
“Nextel Communications and we have experienced a successful six-year relationship. We certainly hope that this cooperative history can continue and believe that it is in all the parties’ interests to work together productively,” Nextel Partners wrote.
Nextel Partners has 1.7 million subscribers. Its stock fell 81 cents yesterday to close at $24.39.
Tricia Duryee: 206-464-3283 or email@example.com