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Sprint to Pay $131M to Settle Class-Action Lawsuit over Nextel Merger

April 1, 2015 - Written By Alexander Maxham

Some of you may remember about 10 years ago when Sprint bought Nextel for about $30 Billion, and was named Sprint Nextel for a bit.  That was also when Sprint turned yellow. Anyone remember this Sprint logo? Well there was a class-action lawsuit brought up by investors, who were arguing that the carrier had fraudulently inflated its stock and bond prices by hiding the health of the company following their merger with Nextel. Documents made public in a federal court in Wichita, Kansas reveals that the settlement will resolve claims that former Sprint CEO Gary Forsee and other officials illegally inflated Sprint’s stock and bond prices between October 2006 and February 2008. This lawsuit was first filed back in May 2009.

In Reuters report, they note that the investors said that Sprint executives falsely claimed the carrier was getting billions of dollars of synergies from the merger and improving its subscriber base by tightening credit standards. But in reality, Sprint was facing tremendous difficulties integrating Nextel’s iDEN network (which they just shut down last year) with their current CDMA network. Thus losing hundreds of thousands of customers. Ultimately, the company made a $29.7 billion goodwill writedown in February of 2008. Which made the merger one of the worst corporate mergers in history.

Stephanie Vinge, Sprint’s spokeswoman, told Reuters that Sprint settled to avoid the cost and distraction of litigation. Stating, “Sprint has and will continue to operate in complete adherence with all federal securities laws.” Sprint has been struggling ever since this merger was done and over with. Gary Forsee was replaced by Dan Hesse in late 2007, who then helped to turn Sprint around, but didn’t get a whole lot done. Hesse did eventually shut down Nextel’s iDEN network and also dropped “Nextel” from their corporate name. In late 2014, Dan Hesse was replaced by Marcelo Claure.

Sprint bought Nextel for their 800MHz spectrum. Which they were unable to use until the past year or two. Which they’ve been working on integrating that into their LTE network, and their tri-band LTE network known as Sprint Spark. The 800MHz spectrum is important to Sprint as it will cover more areas with less towers, and will also penetrate buildings more.