NEW YORK (Reuters) - Sprint Nextel Corp (S.N) is considering a sale of the Nextel wireless network it bought in 2005, but may have trouble finding a buyer for an asset whose value has plunged about 80 percent to an estimated $5 billion.
Sprint has struggled to integrate Nextel’s iDen network, used by public safety and construction workers, with its own services and has lost millions of customers since paying about $35 billion for Nextel Communications three years ago.
Aside from having to compete with newer network standards than iDen, which has a walkie-talkie feature, any buyer would find it tough to reverse the now-completed integration of the iDen business, including its billing, broadcast towers and customer service, analysts say.
“They spent the last few years trying to integrate it,” said Stifel Nicolaus analyst Chris King. “There are a lot of questions that a buyer and the government would have to have.”
Sprint, the No. 3 U.S. mobile service, already faces pressure from the U.S. Federal Communications Commission to relinquish a key chunk of iDen wireless airwaves for emergency communications networks.
Bernstein analyst Craig Moffett also noted that iDen technology, developed by Motorola Inc MOT.N, was being left behind by newer mobile services with broadband Web links.
“It’s not exactly a healthy asset. It’s a sub-scale narrow- band network that has limited capacity and has a subscriber base that’s leaving in droves.”
About 14.6 million subscribers, or 28 percent of Sprint’s total 51.9 million customers, were exclusively using the iDen network at the end of the second quarter. Another 1.7 million used phones working on both iDen and CDMA networks.
Sprint said in a regulatory filing this week that it was exploring alternatives for iDen that include “improving operations, making additional investments, entering into strategic partnerships and considering potential divestitures.”
Sprint included a letter to Keith Cowan, an executive in charge of strategy and development, offering him a $1 million bonus for “the strategic resolution of the iDen network.”
CNBC said on Friday that Latin American service provider NII Holdings Inc NIHD.O, which uses iDen technology, or private equity investors may be interested in the network.
Sprint shares rose 12 percent, also helped by its surprise decision on Thursday to cancel a $3 billion convertible share sale that had been unpopular with shareholders.
Sprint and NII, whose shares rose 0.43 percent, were not immediately available for comment.
Analysts said it made sense for money-losing Sprint to look for ways to improve its finances, even though it does not face an imminent liquidity crisis. Sprint ended the second quarter with a $23 billion debt, and cash and marketable securities of $3.5 billion.
“Every piece of the business is for sale at a certain price right now because they continue to struggle,” said King.
But he noted that an investment in the iDen network, rather than an outright purchase, could make more sense for NII, which operates in countries such as Mexico and Brazil that have faster wireless growth rates than the United States.
The iDen network has faced technical issues Sprint says it has fixed, but customer cancellations have been exacerbated by the weakening U.S. economy and Sprint expects to continue to lose iDen customers in the next few quarters.
In the fourth quarter, Sprint took an impairment charge of $29.7 billion to write off most of the value of Nextel.
Stanford Group analyst Michael Nelson questioned whether Sprint would be able to find a private equity buyer in such a tough credit market.
“Even if they want to sell iDen, I don’t think there’s a buyer,” Nelson added.
Pali Capital analyst Walter Piecyk said in research note that Sprint could attract multiple bidders willing to pay $5 billion or less for the network, without naming suitors.
Additional reporting by Jessica Hall in Philadelphia, Editing by Derek Caney and Andre Grenon