Sprint-Nextel merger approved by shareholders

Merger would create the nation's No. 3 wireless company

OVERLAND PARK, Kan. -- With shareholder blessing in hand, Sprint Corp. and Nextel Communications Inc. are pressing forward to have their unified company -- and its newly branded products -- in stores in time for the holidays.

The two companies still must receive regulatory approval from the Federal Communications Commission and the Justice Department, as well as the 18 states in which Sprint's local phone division operates.

But Sprint chairman and CEO Gary Forsee said Wednesday the discussions he and Nextel chief executive Tim Donahue have had recently with regulators have been positive.

"You get the feeling you're in the clubhouse turn, the final stages," said Forsee, who will become chief executive of the unified Sprint Nextel Corp.

Shareholders of both companies on Wednesday overwhelmingly supported Sprint's $35 billion acquisition of Nextel, taking the next step in creating the nation's No. 3 wireless company with more than 40 million wireless customers and $40 billion in annual revenue.

Nextel, which met in Reston, Va., said the deal was approved by 99.8 percent of the shares that voted. At least 96 percent of Sprint shares voting also approved it. Sprint met in Overland Park, Kan.

The deal is expected to be closed in the third quarter, in time for the holidays when 35 percent of wireless sales are made, Forsee said.

The companies expect $12 billion is savings. While a portion of that will come from eliminating overlapping operations, neither company on Wednesday released any numbers.

The new company will have its corporate headquarters in Reston. An operations headquarters will remain at Sprint's 200-acre campus in Overland Park.

Next year, the unified company plans to spin off Sprint's local telephone service as its own business. Once separate, the as-yet unnamed unit will be the fifth-largest local telecom in the country with 7.6 million access lines in 18 states.

Members of Communications Workers of America, one of two unions that represent local service workers, gathered outside the Sprint shareholders meeting, saying that while they don't oppose the merger, they are worried about benefits and the long-term future of traditional wireline services.

"We're concerned that they'll be saddled with too much debt and not enough revenue stream to be successful," said spokesman Bob Richhart. He said the CWA represents about 3,000 of the 16,000 local service employees.

Forsee disagreed, saying the local service is still strong and still will have access to wireless and long distance services that customers want.

"We're in an alignment to spin off a healthy company," he said.

Forsee said the merger, which creates a solid competitor to industry leaders Cingular Wireless and Verizon Wireless, will benefit customers as it provides greater choice of products and services, and uses the larger network to improve call quality and availability.

"We're about to jump out of our skins to get into the market and compete," Forsee said.

Last month, the two companies unveiled Sprint Nextel's new look, which will make Sprint the lead brand but use Nextel's signature yellow-and-black color scheme. Nextel will remain as a brand name for some products.

Opposition to the deal has been restricted to some consumer advocates worried over the continued consolidation within the telecommunications industry, and certain affiliates of the two companies, possibly angling for better terms after the merger.

Sprint on Monday cleared one of those obstacles by agreeing to buy Lake Charles, La.-based U.S. Unwired Inc., which had filed in federal court for an injunction of the merger, saying it would allow Sprint to violate an exclusivity agreement. Under the deal, Sprint will pay about $1 billion in cash and assume $266 million of the company's debt, and both sides will ask the federal judge to set aside the injunction request.

On Wednesday, Sprint and Nextel said another Sprint affiliate, UbiquiTel Inc., had filed suit in Delaware Chancery Court, claiming the merger would violate its exclusivity agreement with Sprint. The Conshohocken, Pa.-based company, with about 413,000 subscribers, is not asking to stop the deal, both companies said.

Nextel Partners Inc., which sells Nextel services in 31 states, also has filed suit seeking to clarify branding issues as the companies have said Sprint will be the lead brand.

The Kirkland, Wash.-based affiliate also plans to ask its shareholders to vote in favor of requiring the unified company to buy the two-thirds of Nextel Partners that Nextel doesn't own.

Forsee said Wednesday that Sprint and Nextel are continuing to talk with the affiliates on how they will work with the merged company, but wouldn't say if that would require buying some or all of those affiliates.

As part of the "merger of equals," Nextel shareholders will receive 1.3 shares of the new Sprint Nextel Corp. for each of their shares, as well as some cash. The companies said they are structuring the merger to prevent tax liability, so officials don't know yet how much Nextel shareholders will receive. But they said the amount of money to be paid is capped at $2.8 billion.

Analysts said the next big challenge for Sprint and Nextel is meshing their company cultures and business strategies.

Adam Zawel, an analyst for The Yankee Group, a Boston-based research firm, said it will be interesting to see how Sprint officials use the loyalty Nextel's push-to-talk service has amassed with company work crews to try to become those companies' lead telecommunications provider.

"The key is to use Nextel's strength at the edge of the enterprise and use that to forge a stronger relationship," Zawel said.

During Sprint's meeting, shareholders also voted down a shareholder proposal from the AFL-CIO that would have required Sprint to get shareholder approval for any "extraordinary" retirement benefits for senior executives, such as speeding up the vesting of benefits or crediting executives for additional years of service not actually worked.

It failed with only 39 percent of votes cast approving it.