Nextel Partners denied by panel, implications in dispute

Sprint Nextel Corp and Nextel Partners agree that an independent arbitration panel chosen by both companies to resolve their ongoing branding dispute has denied Nextel Partners’ bid for a preliminary legal injunction against Sprint Nextel. However, the companies disagree on the implications of the panel’s findings.

Nextel Partners, in an SEC filing today, admitted that an arbitration panel proceeding that began Aug. 25 ended with the panel denying the company’s bid for an injunction to prevent Sprint Nextel from changing to a branding strategy under which Sprint Nextel would be allowed to sell Nextel Communications-branded products and services—something which Nextel Partners alleged its joint venture agreement with Nextel Communications did not allow.

Sprint Nextel Corp last week officially named Sprint as it premier brand, while indicating it will continue to use Nextel as a product brand.

But, Nextel Partners’ filing today also claims that the panel stated that Nextel Partners is “likely to prevail on its claim that the use of the new Sprint-Nextel brand by Nextel Communications’ operating subsidiaries, without making the new brand available to Nextel Partners, violates the non-discrimination provisions of Section 2.6 of the Joint Venture Agreement” between Nextel Communications and Nextel Partners. The filing further explained that statement by saying that if the branding change affects the valuation of Nextel Partners during the “put” process that Nextel Partners has initiated, Nextel Partners may be entitled to a “monetary award.”

Sprint Nextel Corp issued a statement today quoting the panel as saying that existing contracts between the two companies “do not appear to support” Nextel Partners’ claim that it would be “irreparably harmed” by the rollout of the new Sprint Nextel Corp branding program. That statement makes no mention of the possibility of a monetary award.

Meanwhile, analysts sought to further clarify the ruling. Bear Stearns issued a research note saying, “While the panel did recognize that damage could result to [Nextel] Partners’ valuation, it ruled that any diminution of the put price could be eventually remedied by an additional monetary award.”

Nextel Partners has already filed to hold a shareholder proxy vote to exercise the “put” option in its joint venture agreement that would allow Nextel Communications (now Sprint Nextel Corp) to acquire the 68% of Nextel Partners that it doesn’t already own. During the last few weeks, in anticipation of that “put” process, Sprint Nextel Corp and Nextel Partners have publicly disputed the valuation of Nextel Partners. The timing of the proxy remains undetermined, but Bear Stearns analysts suggested note that the put process could take up to six months.

While the panel ruling seems to be a victory for Sprint Nextel Corp, it continues to face opposition from other of its affiliates. A hearing regarding an injunction filed by affiliate Alamosa Holdings that alleges the Sprint-Nextel merger violated exclusivity rights between Sprint and Alamosa unit AirGate PCS is scheduled for Sept. 13.