Sprint Nextel Corp has made a $1 billion credit deal to buy network equipment from Ericsson, as part of its efforts to build a high-speed wireless network. The project will involve killing off the Nextel part of its business next year.
Sprint, United State's third-largest provider, has been struggling to cover an estimated funding gap of $5 billion to $7 billion. On Tuesday, May 29, the company announced it entered the credit agreement with Deutsche Bank and other banks. The agreement expires in March 2017. Through this new vendor financing deal, Sprint has "largely addressed" the funding requirements it flagged last year, said company spokesman Scott Sloat.
Sprint has been under serious pressure to raise financing due to its previous engagements. The company committed to a $15.5 billion contract with Apple for iPhones, and it also has a $7 billion network project, which aims to upgrade one of its networks and kill off the Nextel network it acquired in 2005.
Sprint also announced on Tuesday that it may shut down the Nextel network as early as June 30 next year. The company had previously announced it would lose the service next year, but had not set a specific date. Sprint will start notifying customers on Sunday.
At the end of March, there were 5.4 million phones active on the Nextel workers, many of them issued by businesses or government agencies to construction crews and other mobile workers. With the shuttering of the Nextel network, Sprint now has to convince its Nextel customers to switch to the Sprint network rather than to rival carriers.
As part of the pitch, Sprint unveiled four Sprint Direct Connect handsets over the past eight months: the DuraMax, DuraCore, DuraPlus, and the Motorola Admiral. Sprint plans to extend coverage of Direct Connect this year. According to the company, it will start transitioning business and government customers from Nextel to Sprint Direct Connect, luring them with favorable offers designed to boost migration to its Sprint network.
Separately, the company also said it would pay back $1 billion of debt on June 8. The debt is set to mature in the fourth quarter of 2013. According to Sprint, the outstanding balance on the 6.875 notes would be around $473 million after the payment.
