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Sprint's iDEN Network May Be Buyout Target

The network came to Sprint via its Nextel acquisition and is still coveted by Nextel's former chairman, Tim Donahue.

Private equity firms may be looking to purchase Sprint Nextel's iDEN network, according to news reports surfacing this week.

The Mergermarket news service reported that private equity interests have been talking with Sprint Nextel about doing a deal, although none of the interested parties has been willing to talk publicly about negotiations.

The network came to Sprint via its Nextel acquisition and is still coveted by Nextel's former chairman, Tim Donahue.

Mergermarket quoted unnamed sources who said Donahue has teamed with one of the private equity firms that include TPG Capital and GS Capital Partners. Donahue teamed up with Providence Equity Partners and SK Telecom last year in a bid to invest $5 billion in Sprint Nextel that would have seen Donahue take over as CEO of the entire company. The bid was rejected and since then Sprint has said it is interested in selling the iDEN network, but only at what it would regard as a favorable price.

While Sprint Nextel announced it would entertain offers for the iDEN network in August, the company also said it is continuing to invest in and improve the network.

"It's not clear what a customer is getting," an investment banking analyst told Mergermarket. "Sprint's been moving customers from iDEN onto its own network. It's integrated iDEN's billing and backhaul functions with its own. A buyer could be getting spectrum and radios, but even if it is, it would be purchasing antiquated technology."

Rapid-fire developments in Sprint Nextel's business have made it difficult to value the company. Sprint launched its much-anticipated initial WiMax hotspot in Baltimore this week, and last week the FCC said it will take up the ever-daunting problem posed by moving Sprint Nextel spectrum in the 800-MHz band that's close to public-safety networks.

Donahue is hailed by his supporters as the leader who made Nextel successful in the early years of the decade and who still knows how to enhance the value of iDEN. His detractors complain that he sold Sprint what they regard as pig-in-a-poke.

Sprint Nextel has been in an agonizing downward financial spin ever since the merger four years ago -- its capital has plunged. Sprint paid $35 billion for Nextel, and, after writing off about $30 billion recently, Sprint's entire market valuation has dropped to less than the $35 billion figure it paid for Nextel to begin with.

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