IPCS sues Sprint over proposed Clearwire deal

NEW YORK (Reuters) - IPCS Inc (IPCS.O), an affiliate of Sprint Nextel Corp (S.N), said on Monday that three of its subsidiaries have sued Sprint over its plans to create a venture with Clearwire Corp (CLWR.O).

IPCS, Sprint's largest affiliate, said the planned $14.5 billion venture would breach exclusivity rights under iPCS's agreements with Sprint, in the latest of multiple legal fights between Sprint and affiliates since its 2005 Nextel purchase.

Shares of iPCS were up $1.75, or 6.5 percent, at $28.89 on Nasdaq after the news while shares in Sprint, which reported a widening quarterly loss on Monday, were down 30 cents, or 3 percent, at $9.09 on New York Stock Exchange.

Jefferies analyst Jonathan Schildkraut said that while Sprint, which has bought several affiliates to resolve legal fights related to the Nextel deal, may end up buying iPCS, such a deal might be delayed by operational problems at Sprint.

"While we believe Sprint may acquire IPCS longer-term, we view the current operating weakness and capital limitations at Sprint as obstacles to a near-term transaction, Schildkraut said in a research note after Sprint said earlier in the day that it could seek waivers from its creditors.

On May 7, the day it announced its plans with Clearwire, Sprint had filed a request at the Court of Chancery in Delaware for a declaratory ruling that the proposed venture was not a violation of its agreements with iPCS.

"This latest action by iPCS is simply a response to our request of the Delaware Court," Sprint spokesman Matthew Sullivan said.

He declined to comment whether Sprint, which has already bought seven affiliates to resolve legal issues in the last few years, would consider buying iPCS.

IPCS, which sells wireless services under the Sprint brand with coverage for a potential 12 million customers in states such as Illinois and Iowa, said it has the exclusive right to sell services under the Sprint brand in 81 markets.

Sprint recently asked the Illinois Supreme Court to examine a case between it and iPCS after an Appeals Court in March upheld a 2006 order from a lower court that Sprint should shut down its Nextel services in iPCS operating regions.

Clearwire and Sprint have said they expect to complete the formation of their venture in the fourth quarter with backing from cable companies such as Comcast Corp (CMCSA.O) and Time Warner Cable Inc (TWC.N), as well as chip maker Intel Corp (INTC.O) and Web search leader Google Inc (GOOG.O).

The venture is expected to offer high-speed wireless services based on WiMax, an emerging technology.

(Reporting by Sinead Carew e-mail, editing by Maureen Bavdek)