jack barse

SPRINT NEXTEL TO ACQUIRE VELOCITA WIRELESS
Transaction Will Enhance iDEN Network’s 900 MHz spectrum position

Sprint Nextel and Velocita Wireless announced today that Sprint will acquire Velocita through a stock purchase agreement and plans to begin use of some of the company’s 900 MHz spectrum. The transaction is subject to customary regulatory approvals, and is expected to be completed during the first half of 2006. Velocita, a leading provider of wireless data connectivity solutions and services, will continue to operate independently until that time. Terms were not disclosed…

After completion of the transaction, Sprint Nextel will utilize a portion of Velocita’s spectrum assets to supplement Sprint Nextel’s coverage for customers on its iDEN® national network. That spectrum use is not expected to impact Velocita’s network coverage or availability. Sprint Nextel will continue to honor existing Velocita customer contracts after the close of the transaction, and will work with customers as appropriate to provide wireless network services that most closely meet their business needs.

“We believe that the addition of Velocita will provide Sprint Nextel with additional spectrum capabilities over 900 MHz that will enhance the iDEN network nationwide and will help ensure Velocita’s customers’ needs are fully met,” said Len Lauer, Chief Operating Officer for Sprint Nextel.

Allow me to translate: Nextel has always been spectrum constrained. They’re buying Velocita only for it’s spectrum licenses, not its network or customers. No new contracts will be written for Mobitex services and once existing contracts expire the network will be shut down. Sprint will do what they can to transition customers to one of their other networks.

So why did Cerberus decide to sell, only 14 months after closing the deal to buy the business? Most likely they decided that Velocita was not going to reach significant profitability anytime soon. Time to pull the line out of the water while there’s still some bait on the hook. They apparently made the judgement that given what’s going on with Mobitex these days Velocita’s spectrum is its most valuable asset.

Very early Thursday morning, in the comments on an earlier post, an anonymous poster asked me what I thought of this deal. I said, among other things, that the integration challenges might outweigh any benefits that Sprint Nextel would gain. Now we know that there will be no integration issues.

This can’t be going over well in Gothenburg. Not only are they losing their biggest customer but there will soon be a surplus of used Mobitex infrastructure gear for sale.

Sheesh.