Since the late 1990s, Sprint has relied on an affiliate program to grow its cellular network. However, many of its 10 affiliates are now facing financial problems as market growth has slowed. Both US Unwired and Horizon PCS could follow the example of iPCS and take legal action against Sprint PCS. US Unwired treasurer Ed Moise has already said: Sprint materially weakened the company. We’re obligated to consider all our options, including a lawsuit.

Both affiliates sell wireless telephone services under the Sprint PCS brand name, which is ranked as the fourth largest US mobile phone company. They blame Sprint PCs for raising charges and forcing them to accept sub-prime customers.

Both affiliates have been struggling under heavy debt levels and slowing subscriber growth. In the fourth quarter, Horizon PCS reported a net loss of $60.3m, compared with a net loss of $40.8m in the year-ago quarter, on revenue of $59.9m, up from $44m. For the year to December 31, it reported a net loss of $188.7m, up from a net loss of $124.4m in 2001, on revenue of $216m, up from $123.3m in 2001.

Horizon PCS has admitted it may file for bankruptcy protection if it is not able to restructure its debt, which stood at $516.3m as of the end of 2002. Company auditors have also stated that its financial problems raise substantial doubt about Horizon’s ability to remain in business.

Like Horizon, the US Unwired auditor has stated that doubts have been voiced about the company’s ability to continue as a going concern because of recurring losses and expected financial covenant violations. US Unwired had $417m in debt at the end of 2002.

In the fourth quarter, it reported a net loss of $450.6m, up from a net loss of $25.5m in the year-ago quarter, on revenue at $148.7m, from $81.2m. For the year to December 31, it reported a net loss of $582.5m, compared with a net loss of $97.6m in 2001, on revenue of $534m, from $259.1m a year earlier.

The US Unwired management could not prevent some bitterness from showing. The financial and operating results that we achieved during the fourth quarter of 2002 illustrate that we have only now begun to show signs of recovery from the deep wounds inflicted by Sprint’s credit policies, said Robert Piper, US Unwired’s president and chief executive officer. Clearly Sprint’s credit policies targeting the sub-prime market, in particular those not requiring a deposit, has weakened our company.

The company is also facing delisting from Nasdaq, as its stock is not in compliance with the $1 stock bid price requirement for continued listing. It intends to ask for extra time at a meeting with the Nasdaq listing qualifications panel at the end of April. Sprint has said the allegations are without merit.

Source: Computerwire