Sprint shareholder sues over telco's financial performance

Sprint shareholder alleges company withheld information from investors

Sprint’s troubles with integrating Nextel users into its service and billing platforms have been well-documented. But now one Sprint shareholder is suing the company for allegedly making “false and misleading statements” about the extent of its difficulties during its Nextel merger.

Cora Bennett, a Sprint common stock shareholder, filed a class action lawsuit with the U.S. District Court of Kansas yesterday alleging that Sprint executives had knowingly concealed information from shareholders about the health of the company’s finances and operations. Among other things, Bennett alleges that Sprint failed to tell shareholders that it would not be able to finish migrating its Nextel customers over to a new billing platform by 2007; that it misled investors about the steps it was taking to address customer service issues; that it did not disclose that it had loosened credit standards for customers using its CDMA network; and that it was increasing its customer base to include more subprime customers.

Because Sprint allegedly tried to conceal bad news from its shareholders, the suit contends that Sprint’s stock price traded at “inflated levels” between late 2006 and early 2008. The suit also claims that Sprint only began acknowledging its problems in its Q4 2007 earnings report, where the company said it was “anticipating continued downward pressure on subscriber trends, revenues and profitability” in 2008. Ever since then, Sprint’s stock price has fallen by more than 50%, going from $8.69 per share on January 18, 2008 to its March 12, 2009 closing price of $3.83.

Sprint spokesman Matt Sullivan responded to news of the lawsuit by denying any alleged wrongdoing and saying that “Sprint has and will continue to operate in complete adherence with all federal securities laws.”

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Sprint’s troubles with integrating Nextel users into its service and billing platforms have been well-documented. But now one Sprint shareholder is suing the company for allegedly making “false and misleading statements” about the extent of its difficulties during its Nextel merger.

Cora Bennett, a Sprint common stock shareholder, filed a class action lawsuit with the U.S. District Court of Kansas yesterday alleging that Sprint executives had knowingly concealed information from shareholders about the health of the company’s finances and operations. Among other things, Bennett alleges that Sprint failed to tell shareholders that it would not be able to finish migrating its Nextel customers over to a new billing platform by 2007; that it misled investors about the steps it was taking to address customer service issues; that it did not disclose that it had loosened credit standards for customers using its CDMA network; and that it was increasing its customer base to include more subprime customers.

Because Sprint allegedly tried to conceal bad news from its shareholders, the suit contends that Sprint’s stock price traded at “inflated levels” between late 2006 and early 2008. The suit also claims that Sprint only began acknowledging its problems in its Q4 2007 earnings report, where the company said it was “anticipating continued downward pressure on subscriber trends, revenues and profitability” in 2008. Ever since then, Sprint’s stock price has fallen by more than 50%, going from $8.69 per share on January 18, 2008 to its March 12, 2009 closing price of $3.83.

Sprint spokesman Matt Sullivan responded to news of the lawsuit by denying any alleged wrongdoing and saying that “Sprint has and will continue to operate in complete adherence with all federal securities laws.”

In 2008, Sprint posted an annual loss of $2.8 billion, and also lost more than 4 million wireless subscribers. This past January, the company announced plans to and lay off 8,000 workers to save money on labor expenses.

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