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1/31/2008
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Sprint May Write Off Value Of Nextel Acquisition

Sprint Nextel announced that it might write off $30.7 billion, most of it likely recorded from its acquisition of Nextel.

Just a day after Sprint Nextel sang the praises of Nextel's push-to-talk and Nextel's iDEN network, Sprint told investors that it might write off the $30.7 billion in goodwill value, most of it likely recorded from its acquisition of Nextel.

In a filing Thursday with the Securities and Exchange Commission, Sprint Nextel said the write off could "represent a substantial portion, and potentially all" of the nearly $31 billion the company keeps on its books. The filing was reported by the Kansas City Star.

The charge presumably would cover much, if not all, of the $35 billion that Sprint paid to acquire Nextel, representing most of the difference between what Sprint paid for Nextel and what it believes the Nextel business is worth now.

Nextel had great success with its push-to-talk technology, but it also had a hodge-podge of spectrum that Sprint has struggled to integrate with its CDMA network. A year ago, former CEO Gary Foresee complained that demand was dropping for its iDEN network. In recent weeks, new CEO Dan Hesse has instituted sweeping changes, including layoffs. Many more announcements are expected in coming weeks.

On Wednesday, Hesse said subscribers will see continued investment in push-to-talk and the iDEN network. "The Nextel National Network is key to delivering Nextel Direct Connect," he said in a statement. "Sprint has invested significantly during the past two years and the network is performing at best-ever levels. Customers can expect to see continued investment and the introduction of new handsets to utilize the network's unique capabilities."

Sprint also highlighted its coming "push-to-x" service, which instantly sends a text message and other data over the iDEN network.

In October, Fitch Ratings, which examines the creditworthiness of companies, said it was concerned about Sprint's ability to migrate the iDEN customer base to Sprint's CDMA network.

Sprint is also challenged by its expensive drive to deploy a $5 billion nationwide WiMax network that could compete with its CDMA2000 EV-DO network. Earlier this week, reports surfaced that Sprint was talking with Clearwire, Intel, and Google, as well as others, in an effort to drum up financial partners for its WiMax rollout.

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