Affiliate sues troubled Sprint Nextel over WiMax deal

By Mickey Alam Khan

May 13, 2008

Sprinting subscribers

Wireless carrier Sprint Nextel’s association with the newly formed national mobile WiMax network Clearwire Corp. has already cost it a lawsuit from its largest independent affiliate.

IPCS Inc. and its three subsidiaries have filed a complaint in the Circuit Court of Cook County, IL, against Sprint Nextel and its related entities. The suit claims that Sprint’s agreement with Clearwire violates affiliate agreements.

Sprint Nextel is one of many partners in Clearwire, which has win $3.2 billion in investment from brands such as Google, Intel, Comcast, Time Warner Cable and Bright House Networks. The deal was announced last week (see story).

The suit couldn’t have come at a worse time for Sprint Nextel. The carrier yesterday announced it ended the first quarter with 52.8 million customers, recording a loss of 1.1 million postpaid subscribers.

IPCS has two bones to pick with Sprint Nextel.

First, Sprint’s WiMax transaction with Clearwire would breach the exclusivity provisions of iPCS’ affiliate agreements with Sprint Nextel.

Next, iPCS claims that Sprint Nextel is attempting to evade a judgment of the Circuit Court of Cook County pertaining to the Sprint merger with Nextel which was unanimously affirmed by the Illinois Appellate Court.

This judgment is said to require Sprint Nextel to cease owning, operating and managing the Nextel network in iPCS Wireless’ territory.

IPCS wants a declaratory judgment that Sprint Nextel’s consummation of the Clearwire/WiMax transaction and its plan to compete against iPCS will breach the iPCS agreements with the carrier, the plaintiff said.

Also, iPCS asked the court for a permanent injunction against Sprint and its related entities in consummating the WiMax deal until the transaction has been modified to comply with the iPCS agreements with Sprint Nextel.

Through its subsidiaries, iPCS is the Sprint affiliate of Sprint Nextel. It claims the exclusive right to sell wireless mobility communications network products and services under the Sprint brand in states such as Illinois, Michigan, Pennsylvania, Indiana, Iowa, Tennessee and Ohio.

Based in Schaumburg, IL, iPCS has an estimated 640,600 subscribers.

In its complaint, iPCS said it has litigated with Sprint Nextel for nearly three years over the exclusivity provisions of its affiliation agreements and claims repeated court victories.

“IPCS believes that Sprint Nextel’s recently announced WiMax transaction is yet another attempt by Sprint Nextel to breach the exclusivity provisions of the iPCS affiliation agreements,” iPCS said in a statement.

“IPCS intends to fully and aggressively protect and defend its exclusivity rights,” the company said.