Sprint has legal problems

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A state court in Kansas has given the go-ahead to shareholders to wage a class action battle against Sprint, its CEO and its directors for breach of fiduciary duty. Potential liability in the suit could be as high as $10 billion. The decision was issued by Judge Kevin P. Moriarity, district judge in Johnson City, KS.

The central allegations are tied to the issue of conversion of the two tracking stocks –FON and PCS –in a skewed manner that unfairly benefited certain directors, rather than the company’s shareholders. The suit is brought by institutional investor Carlson Capital. Last fall, several months after the shareholder lawsuit was filed, Sprint took a $3.6 billion write-off on the FON operations, essentially admitting that the land-line business was highly overvalued at the time of the combination. “With that write-off, the company made a de facto admission that it grossly overpaid for the FON stock – we argue that it’s time to transfer that value rightly to PCS shareholders,” said attorney Jay Eisenhofer, name partner at Grant & Eisenhofer, who argued the motion for Carlson Capital.

I wonder if this means problems with the Sextel-deal.

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Jesse Kopelman

Has anybody thought about how screwed Nextel would be if the merger fell through? They are now officially commited to relocate to 1900MHz and that means a hell of a lot of new cell sites. They were counting on not only using Sprint’s existing sites but Sprint’s existing money. I think that would put them in panic mode looking for a new buyer — could be just the opportunity Vodaphone is looking for as the 1900MHz allocation is just the right size for UMTS.

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