iPCS, Inc. (NASDAQ: IPCS), a PCS Affiliate of Sprint Nextel (NYSE: S), today announced that the Honorable Judge Kathleen M. Pantle has denied Sprint’s motion to dismiss or stay the lawsuit brought by three subsidiaries of iPCS in the Circuit Court of Cook County, Illinois, Chancery Division, against Sprint regarding Sprint’s planned WiMax transaction with Clearwire Corporation (NASDAQ: CLWR). iPCS’s subsidiaries are seeking a declaratory judgment that Sprint’s consummation of the transaction, and its plan to compete against the iPCS affiliates, will breach the affiliation agreements of the subsidiaries with Sprint. The iPCS subsidiaries are asking the court for a permanent injunction enjoining Sprint and those acting in concert with it from consummating the transaction until such transaction can be modified to comply with the subsidiaries’ affiliation agreements with Sprint.
“We are delighted with the Illinois court’s decision denying Sprint’s motion and allowing our case to be heard,” commented Timothy M. Yager, President and CEO of iPCS. “Over the past few years, the exclusivity provisions of our affiliation agreements have been continually tested by Sprint, and we believe that it is appropriate and necessary to continue to defend our rights under the agreements. We firmly believe that the Illinois courts, including the Illinois Appellate Court, that have previously enforced our exclusivity protection will also find that this latest attempt by Sprint to compete with us in our territory is another violation of our agreements,” stated Yager.
iPCS and its subsidiaries have been involved in litigation with Sprint for nearly three years over the exclusivity provisions of their affiliation agreements, and have repeatedly won significant court rulings. Most recently, on March 31, 2008, the Illinois Appellate Court unanimously upheld the Circuit Court’s earlier ruling requiring Sprint to cease owning, operating or managing the Nextel wireless network in iPCS Wireless, Inc.’s territories, which cover parts of five states. Sprint has asked the Supreme Court of Illinois to hear its further appeal of the earlier decisions. A decision whether to hear Sprint’s appeal is expected this Fall.
Sprint - Clearwire Litigation Background
On May 7, 2008, Sprint Nextel announced it had agreed to enter into a transaction among itself, Clearwire Corporation and certain other parties (the “Sprint-Clearwire Transaction”). The same day, Sprint Nextel filed a complaint for declaratory judgment against the Company and certain of its subsidiaries in the Court of Chancery of the State of Delaware. In that lawsuit, Sprint Nextel seeks a declaration that the Sprint-Clearwire Transaction would not constitute a breach of the three separate Sprint affiliation agreements it has with the Company’s subsidiaries.
On May 12, 2008, the Company and certain of its subsidiaries filed a lawsuit against Sprint Nextel Corporation and certain of its affiliates in the Circuit Court of Cook County, Illinois, seeking declaratory and injunctive relief with respect to the Sprint-Clearwire Transaction. In that case, the Company and its subsidiaries seek a declaration that the Sprint-Clearwire Transaction, if consummated, would constitute a breach of the Sprint affiliation agreements between Sprint Nextel and certain of the Company’s subsidiaries, and also seek an injunction barring Sprint Nextel from consummating the Sprint-Clearwire Transaction, until the transaction is modified to comply with the affiliation agreements. The case was stayed pending certain events in the Delaware litigation initiated by Sprint Nextel. Sprint Nextel moved to dismiss the Illinois case or, in the alternative, to continue the stay. The Company moved to lift the stay in the case. On September 15, 2008, the Circuit Court denied Sprint Nextel’s motion to dismiss the Illinois case
On July 14, 2008, the Court of Chancery of the State of Delaware issued an opinion granting the motion of the Company and its subsidiaries, dismissing two of the Company’s subsidiaries, Horizon Personal Communications, Inc. and Bright Personal Communications Services, LLC from the Delaware litigation, and denied the motion to dismiss iPCS and its subsidiary, iPCS Wireless, Inc. On July 28, 2008, iPCS Wireless, Inc. filed a counterclaim in the Delaware Court in which it seeks a declaration that the Sprint-Clearwire Transaction, if consummated, would constitute a breach of the Sprint affiliation agreements. The same day, iPCS and iPCS Wireless, Inc. filed a motion to dismiss the remainder of the case pending before it or, in the alternative, to transfer the case to the Superior Court of the State of Delaware. The Delaware Court has not yet ruled on that motion.
Sprint/Nextel Litigation Background and Update
On July 15, 2005, the Company’s wholly owned subsidiary, iPCS Wireless, Inc., filed a complaint against Sprint and Sprint PCS in the Circuit Court of Cook County, Illinois. The complaint alleged, among other things, that Sprint’s conduct following the consummation of the merger between Sprint and Nextel, would breach Sprint’s exclusivity obligations to iPCS Wireless under its affiliation agreements with Sprint PCS. On August 14, 2006, the Circuit Court issued its decision and on September 20, 2006, the Circuit Court issued a final order effecting its decision. The final order provides that:
- Within 180 days of the date of the final order, Sprint and those acting in concert with it must cease owning, operating, and managing the Nextel wireless network in iPCS Wireless’s territory.
- Sprint shall continue to comply with all terms and conditions of the Forbearance Agreement between the Company and Sprint setting forth certain limitations on Sprint’s operations following the merger with Nextel.
On September 28, 2006, Sprint appealed the Circuit Court’s ruling to the Appellate Court of Illinois, First Judicial District, and, at Sprint’s request, the effectiveness of the Circuit Court’s ruling was stayed by the Appellate Court pending the appeal. On March 31, 2008, the Appellate Court unanimously affirmed the 2006 Circuit Court decision. On May 5, 2008, Sprint filed a petition for leave to appeal with the Supreme Court of Illinois. The Supreme Court’s decision on Sprint’s petition for leave to appeal is expected this Fall.
About iPCS, Inc.
iPCS, through its operating subsidiaries, is a Sprint PCS Affiliate of Sprint Nextel with the exclusive right to sell wireless mobility communications network products and services under the Sprint brand in 81 markets including markets in Illinois, Michigan, Pennsylvania, Indiana, Iowa, Ohio and Tennessee. The territory includes key markets such as Grand Rapids (MI), Fort Wayne (IN), Tri-Cities (TN), Scranton (PA), Saginaw-Bay City (MI) and Quad Cities (IA/IL). As of June 30, 2008, iPCS's licensed territory had a total population of approximately 15.1 million residents, of which its wireless network covered approximately 12.2 million residents, and iPCS had approximately 654,000 subscribers. iPCS is headquartered in Schaumburg, Illinois. For more information, please visit iPCS’s website at www.ipcswirelessinc.com.
“Safe Harbor” Statement under Private Securities Litigation Reform Act of 1995
Statements in this press release regarding iPCS's business which are not historical facts are "forward-looking statements." Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or the negative thereof or variations thereon or similar terminology. Such statements are based upon the current beliefs and expectations of management and are subject to significant risks and uncertainties. A variety of factors could cause actual results to differ materially from those anticipated in iPCS's forward-looking statements, including, but not limited to, the following factors: (1) iPCS's dependence on its affiliation with Sprint; (2) the final outcome of iPCS's litigation against Sprint concerning the Sprint/Nextel merger and the scope of iPCS's exclusivity, including with respect to Sprint's proposed WiMAX transaction with Clearwire; (3) changes in Sprint's affiliation strategy as a result of the Sprint/Nextel merger and Sprint's acquisition of all but three Sprint Affiliates of Sprint Nextel; (4) changes in Sprint's ability to devote as much of its personnel and resources to the remaining three Sprint Affiliates of Sprint Nextel; (5) changes in iPCS's customer default rates and increases in bad debt expense; (6) changes or advances in technology; (7) changes in Sprint's national service plans, products and services or its fee structure with iPCS; (8) declines in the relationship between roaming revenue iPCS receives and roaming expense iPCS pays; (9) the impact on iPCS's business of the recent amendments to iPCS's affiliation agreements with Sprint; (10) iPCS's reliance on the timeliness, accuracy and sufficiency of financial and other data and information received from Sprint; (11) difficulties in network construction, expansion and upgrades; (12) increased competition in iPCS's markets; (13) iPCS's dependence on independent third parties for a sizable percentage of its sales; (14) the inability to open the number of new stores and to expand the co-dealer network as planned; and (15) the depth and duration of the economic downturn in the United States. For a detailed discussion of these and other cautionary statements and factors that could cause actual results to differ from iPCS's forward-looking statements, please refer to iPCS's filings with the SEC, especially in the "risk factors" section of the Annual Report on Form 10-K for the fiscal year ended December 31, 2007, our Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008 and in any subsequent filings with the SEC. Investors and analysts should not place undue reliance on forward-looking statements. The forward-looking statements in this document speak only as of the date of the document and iPCS assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements.