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Nov. 29 (Bloomberg) -- Sprint Nextel Corp. rejected a $5 billion investment offer by South Korea's SK Telecom Co. and buyout firm Providence Equity Partners Inc., according to a person familiar with the offer.
The group sent a letter before Nov. 22 offering to buy securities convertible into Sprint shares and proposing the return of former Sprint chairman Tim Donahue, said the person, who asked not to be identified because the approach was private. SK Telecom spokesman Ko Chang Kook confirmed that the Seoul-based company approached Sprint in mid-November.
Sprint, based in Reston, Virginia, has been searching for a new chief executive officer since Gary Forsee departed in October as complaints about dropped calls and poor customer service led to customer defections. SK Telecom's participation in the offer highlights the company's ambitions in the U.S. after failing to generate profits from its mobile-phone venture in the country.
``Trying to buy a stake in Sprint suggests SK Telecom wants to maintain its mobile service in the U.S.,'' said Stan Jung, an analyst at Woori Investment & Securities Co. in Seoul. ``Still, it's less meaningful if the stake is very small and there may be questions as to why they need to do it now.''
Sprint rose 44 cents, or 3 percent, to $15.20 in New York Stock Exchange composite trading. The stock has dropped 20 percent this year, compared with the 3.6 percent gain by the Standard & Poor's 500 Index.
Convertible Offer
The group proposed buying Sprint securities convertible into equity for 20 percent to 30 percent more than the current stock price, the person said.
The board didn't meet with Donahue or the investors before turning down the deal, the person said. Donahue, 58, was chairman following the 2005 merger with Nextel until he retired last year. The group isn't interested in pursuing a hostile takeover. The Wall Street Journal reported the rejected approach earlier today.
SK Telecom and partners, including a financial investor, approached Sprint in mid-November about cooperating with the U.S. mobile-phone company, SK Telecom's Ko said, declining to name the partners or comment on financial terms. SK Telecom hasn't been officially notified about the offer being rejected, Ko said.
Sprint spokesman James Fisher declined to comment and Providence Equity spokeswoman Julie Fisher didn't immediately respond to a voice-mail message left at her office in Providence, Rhode Island.
Customer Retention
Sprint, the third-largest U.S. mobile-phone company, plans to do a better job keeping customers, Paul Saleh, acting chief executive officer, said last month. The company will offer more customer-service features online and sell new phone models for Nextel's network, he said.
Shareholders including Ralph Whitworth of San Diego-based Relational Investors LLC have urged Sprint to focus more on improving the operations. After Forsee's departure, Sprint dropped plans with Clearwire Corp. to build a new high-speed wireless network. Sprint continues to construct the network by itself.
SK Telecom is seeking investments outside of its home country, where almost nine out of 10 people have a wireless handset. Chief Executive Officer Kim Shin Bae said in an interview last month that the company was reviewing ``various collaboration options'' with Sprint.
Helio LLC, SK Telecom's U.S. venture with Atlanta-based Earthlink Inc., hasn't made a profit since it started in May 2006. The venture uses Sprint's network to sell wireless service.
To contact the reporters on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net ; Jason Kelly in New York at jkelly14@bloomberg.net .
The group sent a letter before Nov. 22 offering to buy securities convertible into Sprint shares and proposing the return of former Sprint chairman Tim Donahue, said the person, who asked not to be identified because the approach was private. SK Telecom spokesman Ko Chang Kook confirmed that the Seoul-based company approached Sprint in mid-November.
Sprint, based in Reston, Virginia, has been searching for a new chief executive officer since Gary Forsee departed in October as complaints about dropped calls and poor customer service led to customer defections. SK Telecom's participation in the offer highlights the company's ambitions in the U.S. after failing to generate profits from its mobile-phone venture in the country.
``Trying to buy a stake in Sprint suggests SK Telecom wants to maintain its mobile service in the U.S.,'' said Stan Jung, an analyst at Woori Investment & Securities Co. in Seoul. ``Still, it's less meaningful if the stake is very small and there may be questions as to why they need to do it now.''
Sprint rose 44 cents, or 3 percent, to $15.20 in New York Stock Exchange composite trading. The stock has dropped 20 percent this year, compared with the 3.6 percent gain by the Standard & Poor's 500 Index.
Convertible Offer
The group proposed buying Sprint securities convertible into equity for 20 percent to 30 percent more than the current stock price, the person said.
The board didn't meet with Donahue or the investors before turning down the deal, the person said. Donahue, 58, was chairman following the 2005 merger with Nextel until he retired last year. The group isn't interested in pursuing a hostile takeover. The Wall Street Journal reported the rejected approach earlier today.
SK Telecom and partners, including a financial investor, approached Sprint in mid-November about cooperating with the U.S. mobile-phone company, SK Telecom's Ko said, declining to name the partners or comment on financial terms. SK Telecom hasn't been officially notified about the offer being rejected, Ko said.
Sprint spokesman James Fisher declined to comment and Providence Equity spokeswoman Julie Fisher didn't immediately respond to a voice-mail message left at her office in Providence, Rhode Island.
Customer Retention
Sprint, the third-largest U.S. mobile-phone company, plans to do a better job keeping customers, Paul Saleh, acting chief executive officer, said last month. The company will offer more customer-service features online and sell new phone models for Nextel's network, he said.
Shareholders including Ralph Whitworth of San Diego-based Relational Investors LLC have urged Sprint to focus more on improving the operations. After Forsee's departure, Sprint dropped plans with Clearwire Corp. to build a new high-speed wireless network. Sprint continues to construct the network by itself.
SK Telecom is seeking investments outside of its home country, where almost nine out of 10 people have a wireless handset. Chief Executive Officer Kim Shin Bae said in an interview last month that the company was reviewing ``various collaboration options'' with Sprint.
Helio LLC, SK Telecom's U.S. venture with Atlanta-based Earthlink Inc., hasn't made a profit since it started in May 2006. The venture uses Sprint's network to sell wireless service.
To contact the reporters on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net ; Jason Kelly in New York at jkelly14@bloomberg.net .
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