THOMASN. HANNA Attorney at Law 1206 VIRGINIA STREET, EAST, SUITE 201 CHARLESTON, WV 25301 MAILING ADDRESS: TELEPHONE (304)342-1687 P. 0. BOX3967 March 10,2006 FAX (304)342-8761 CHARLESTON, wv 25339 e-mail: thannalawQcharter.net
VIA HAND DELIVERY Sandra Squire Executive Secretary Public Service Commission 201 Brooks Street Charleston, WV 25301 Re: CaseNo. 06aL046 Sprint Long Distance, Inc., a corporation. Application for consent and approval to transfer control of Sprint Long Distance, Inc., from Sprint Nextel Corporation to Embarq Corporation.
Dear Ms. Squire:
On behalf of Sprint Long Distance, Inc., a corporation, I hand you herewith for filing the original and twelve (12) copies of their Application for consent and approval to transfer control of Sprint Long Distance, Inc., from Sprint Nextel Corporation to Embarq Corporation. Please note that expedited action in this filing is requested upon approval of Sprint Long Distance’s application for a certificate to provide resold intrastate interexchange telecommunications services within West Virginia, which application was filed simultaneously herewith.
If you need anything further, please let me know.
Thomas N. Hanna WV State Bar # 1581
TNH/th Enclosure cc: B. Atkinson, Esq. PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON
PETITION OF ) 1 SPRINT LONG DISTANCE, INC. 1
FOR THE CONSENT AND APPROVAL TO 1 TRANSFER CONTROL OF 1 Case No. SPRINT LONG DISTANCE, INC. FROM SPRINT NEXTEL CORPORATION TO 1 EMBARQ CORPORATION
EXPEDITED APPLICATION FOR AUTHORIZATION FOR TRANSFER OF CONTROL
Comes now the above-named Sprint Long Distance, Inc. (“SLDI” or “petitioner”), petitioner herein, and through counsel respectfully shows the Commission as follows:
1. That the name and address of the petitioner are:
Sprint Long Distance, Inc. 6200 Sprint Parkway Overland Park, Kansas 6625 1
Correspondence regarding this application should be directed to:
Julie Corsig Davis Wright Tremaine LLP 1500 K Street, N.W. Suite 450 Washington, D.C. 20005 (202) 508-6628 j uliecorsin@,dwt.com
Thomas N. Hanna Attorney at Law P.O. Box 3967 Charleston, WV 25339 ~ ~ ~~ ~~~~~William R. Atkinson Sprint Nextel 3065 Cumberland Circle Mailstop GAATLD0 602 Atlanta, Georgia 303 39 (404) 649-4882 (0) -m -m
2. That the name and address of the utility whose property is sought to be acquired are:
Sprint Long Distance, Inc. 6200 Sprint Parkway Overland Park, Kansas 6625 1
3. That the financial condition of the petitioner and of the utility whose property is sought to be acquired are:
Attached as Exhibit A is a balance sheet and income statement for SLDI as of January 3 I,
2006. See Paragraph 6 below regarding the financial condition of the acquiring company,
Embarq Corporation. Both SLDI, as the operating company, and Embarq Corporation, as the
acquiring company, are financial capable to ensure quality services are provided to the residents
of West Virginia.
4. Description of the transaction and the parties to the transaction.
Commission approval is requested to transfer control of Sprint Long Distance, Inc. from
its current parent company, Sprint Nextel Corporation (“Sprint Nextel”), to Embarq Corporation
(“Embarq”). Petitioner requests expedited Commission approval of the proposed transaction no
later than April 17,2006. The following is a description of the entities involved in the proposed
transaction:
Sprint Nextel Corporation. Sprint Nextel is a publicly-traded Kansas corporation with
executive headquarters at 200 1 Edmund Halley Drive, Reston, Virginia 201 91 and operational
2 ~~ headquarters at 6200 Sprint Parkway, Overland Park, Kansas 6625 1.* Sprint Nextel is a global communications company providing wireless, long distance, and local communications services.
Sprint Nextel’s ILECs provide a full portfolio of communications services, including local, long distance, high-speed data, wireless and video in approximately 18 states. Sprint has no ILEC operations in West Virginia. As of December 3 1,2004, Sprint Nextel’s ILEC operations served approximately 7.7 million local access lines in 18 states.
Embarq Corporation. Embarq, a newly formed subsidiary of Sprint Nextel, is a Delaware corporation with its corporate headquarters in the Kansas City metropolitan area, at 5454 11 Ofh
Street, Overland Park, Kansas 6621 1. Upon the transfer of control, Embarq will realize control of the Sprint ILEC entities in other states (Le., not in West Virginia) as well as SLDI in West
Virginia. At that time, Embarq will operate independently from Sprint Nextel and will have its own management team and board of directors. Upon the separation from Sprint Nextel, Embarq is expected to be a NYSE-listed company with approximately $6 billion in annual revenues, rank among the Fortune 500 and serve as the fifth largest local communications company in the
United States based on the company’s 7.4 million access lines as of September 30,2005. The company will provide a suite of communications services, consisting of local and long distance voice and data services, including high-speed Internet access.
Sprint Long Distance, Inc. SLDI is a Delaware corporation with principal offices located at 6200 Sprint Parkway, Overland Park, Kansas 6625 1. SLDI is currently a wholly-owned
~~ On December 15,2004, Sprint Corporation and Nextel Communications, Inc. (Nextel) entered into a merger agreement pursuant to which, upon obtaining requisite Sprint and Nextel stockholder approval and satisfaction of the other conditions to the merger, Nextel would merge with and into a wholly owned subsidiary of Sprint. By letter filed February 16,2005, Sprint and Nextel advised this Commission of the planned merger, which did not require Commission approval. The conditions of the merger were satisfied and the merger closed on August 12,2005. The corporation’s new name is “Sprint Nextel Corporation.” In the merger agreement, Sprint and Nextel agreed to use their reasonable best efforts to separate the ILEC business of Sprint, by means of a tax-free spin-off to the then-existing stockholders of Sprint Nextel.
3 subsidiary-of~ Sprint Nextel. On March 10,2006, Sprint Long Distance, Inc. filed an Application for a Certificate of Convenience and Necessity to provide intrastate interexchange services in
West Virginia. SLDI anticipates receiving its authorization to provide interexchange services in
West Virginia in April, 2006. As discussed herein, SLDI has been created for the purpose of providing intrastate interexchange services for the customers of Embarq’s ILECs that have multi- state locations/offices (including in West Virginia). This transfer of control application is being filed in anticipation of SLDI receiving its authorization to provide services in West Virginia prior to the transfer of control taking place.
5. Terms and conditions of transfer and copy of any agreements.
Sprint Nexte12 intends to separate its wireline local service operation into an independent, standalone operation. As part of that transaction, a new holding company, Embarq Corporation, has been created and control of the Sprint Nextel operating companies serving local customers - essentially, Sprint Nextel’s ILEC operations -- will be transferred to that holding company. The transfer of control of SLDI to Embarq is associated with, and an incidental aspect of the primary transfer of control of the Sprint Nextel ILECs (in other states) from Sprint Nextel to Embarq.
For instance, SLDI is being established to provide long distance service to Embarq’s ILEC customers. Although Sprint Nextel does not have ILEC operations in West Virginia, in some cases, Sprint Nextel ILECs in other states serve business customers with multi-state offices, some of which are in West Virginia, and which require long distance services between or among
On December 15,2004, Sprint Corporation and Nextel Communications, Inc. (Nextel) entered into & merger agreement pursuant to which, upon obtaining requisite Sprint and Nextel stockholder approval and satisfaction of the other conditions to the merger, Nextel would merge with and into a wholly owned subsidiary of Sprint. By letter filed February 16,2005, Sprint and Nextel advised this Cowmission of the planned merger, which did not require Commission approval. The conditions of the merger were satisfied and the merger closed on August 12,2005. The corporation’s new name is “Sprint Nextel Corporation.” In the merger agreement, Sprint and Nextel agreed to use their reasonable best efforts to separate the ILEC business of Sprint, by means of a tax-free spin-off to the then-existing stockholders of Sprint Nextel.
4 _the_offiicles._TheseSpri~~C~~usinesscustomers who have business locations in West Virginia
will receive interexchange services from SLDI.3
Additional information related to the transaction is provided in paragraph 7, below. The
parties consider the underlying Agreement related to the transfer of control of the entities from
Sprint Nextel to Embarq to be confidential. To the extent the Commission determines that more
details regarding the terms of the transaction are necessary in order to approve the transaction,
Applicants will provide the Commission with relevant additional information subject, as needed,
to the terms of an acceptable Protective Order.
6. The effect of the proposed transaction upon the service of the parties thereto.
There will be no changes to SLDI’s operations in West Virginia nor any transfer of the
operating authority held by the company. Embarq will operate independently fiom Sprint Nextel
and will have its own management team and board of directors. However, the proposed
transaction will result only in a change in the ultimate ownership of SLDI? and will not affect
the operations of SLDI. From an operational perspective, little will change for SLDI. SLDI will
retain its authorization to provide telecommunications services in West Virginia (once granted),
and will continue to have the same technical, financial and managerial ability to provide reliable
services as it does today. Customers of SLDI will receive services under the same rates, terms
and conditions as they do currently. Accordingly, the transfer of control will be transparent to
customers.
Further, following separation, SLDI will benefit from being aligned with Embarq and the
local exchange services it offers in other states, rather than being a part of the larger wireless
The name of SLDI will likely change as it becomes part of Embarq. Once chosen, any state- required registrations, filings or notifications related to the name change will be provided. Exhibit B hereto depicts the corporate structure of Sprint Nextel and Embarq both before and after the transaction.
5 operations of Sprint Nextel. Embarq ’s single-minded focus will be on its wireline markets, first and foremost -- not as a communications carrier that is part of a national wireless carrier.
Customers will benefit fiom the increased focus on their needs. Embarq’s focus will allow a stronger local and wireline emphasis and permit it to provide services tailored to the needs of its customers, while maintaining the service quality and customer care to which its customers are accustomed. The company will ensure that service quality and the customer experience remain high priorities.
A highly experienced management team will lead Embarq, maintaining the quality of management of SLDI. Daniel R. Hesse has been named the Chief Executive Officer of Embarq.
Mr. Hesse has extensive experience in the telecommunications industry, including 23 years at
AT&T, where he served as President and Chief Executive Officer of AT&T Wireless Services from 1997-2000. Most recently, Mr. Hesse was Chairman, President and Chief Executive
Officer of Terabeam Corporation, a Seattle-based telecommunications company. Michael B.
Fuller has been named Chief Operating Officer of Embarq. Mr. Fuller, currently President and
Chief Operating Officer of Sprint’s Local Telecommunications division, has had responsibility for leading Sprint’s local telephone operations since 1996. Gene Betts, formerly Sprint
Corporation’s Senior Vice President and Treasurer, has been named Chief Financial Officer of
Embarq. Tom Gerke, formerly Executive Vice President-General Counsel and External Affairs of Sprint Corporation, has been named General Counsel for Embarq. James A. Hansen has been named the senior officer to lead Embarq’s Network and Customer Service Organization. For Mr.
Hansen, this represents a continuation of his current responsibilities and focus on the network operations of Sprint’s ILECs. The senior management team has an average tenure in the telecommunications industry of nearly 1 8 years, with approximately 170 years of combined
6 ~~ Sprint experience. This seasoned team oMecammunications-executives-will-ensure-thaLSLDI
will be well-managed and provide quality service to the customers in West Virginia.
Moreover, upon completion of the separation, SLDI will continue to be financially
capable of fulfilling all of the requirements of a regulated telecommunications company in West
Virginia. Embarq, which will among other things raise capital for SLDI, will possess the
financial capability to assist the company in providing quality service to its customers in West
Virginia. Upon the separation from Sprint Nextel, Embarq is expected to be a NYSE-listed
company with approximately $6 billion in annual revenues, rank among the Fortune 500 and
serve as the fifth largest local comunications company in the United States. It will have the
ability to raise capital and to make any investment in the network, employees and systems
necessary to continue providing high quality service. SLDI will therefore clearly have the
financial resources to provide its services in West Virginia.
7. State the method of completing the proposed transfer of control.
In order to accomplish this separation, Embarq Corporation will be the recipient of
Sprint Nextel’s ILEC operations in Sprint Nextel’s eighteen “in-region” states (which does not
include West Virginia), and of SLDI. The approval Sprint is requesting here from the
Commission will allow the transfer of control of those ILEC subsidiaries and SLDI from Sprint
Nextel to Embarq Corporation. Embarq Corporation will then transfer its stock in the ILEC
subsidiaries and SLDI to Sprint Nextel who will then distribute the shares, in a yet to be
determined ratio, to each of its existing shareholders. The result is quite simple. One hundred
percent (1 00%) of the ownership of Embarq Corporation will be given to the Sprint shareholders
as of the date of separation. Embarq Corporation will be a separately traded stand-alone
7 xornpanyiwhichSprintxetains no-ownership.-Embarq-Corporation-will-be-thesole owner-of- all of the stock of the ILEC operations and SLDI.
8. State whether any other utility will be affected and, if so, how?
The proposed transfer of control will affect only SLDI, its current parent company, Sprint
Nextel, and its proposed parent company, Embarq.
9. State the reasons why the prayer of the petition should be granted.
As set forth herein, the transfer of control will be transparent to customers in West
Virginia and the new ultimate parent company, Embarq, has the managerial, technical and financial qualifications to acquire control of SLDI. The transaction will benefit SLDI customers by increasing the focus on their needs by transferring control of SLDI from Sprint Nextel’s increasingly wireless-centric focus to Embarq’s focus on local and wireline customers. Approval of the petition is therefore in the public interest.
WHEREFORE, Sprint Long Distance, Inc. respectfully requests that this Commission grant it authority to transfer control of Sprint Long Distance, Inc. from its current parent company, Sprint Nextel Corporation, to Embarq Corporation. The separation of the Sprint
Nextel wireline local service operation into an independent, standalone operation - and therefore the transfer of control addressed herein - is expected to take place in early May, 2006. In order to permit the parties to carry out their respective business plans in a timely and efficient manner, the Applicant requests expedited Commission approval of the proposed transaction no later than
April 17,2006.
Respectfully submitted this lothday of March, 2006.
8 JUlkCoBig Davis Wright Tremaine LLP 1500 K Street, N.W. Suite 450 Washington, D.C. 20005 (202) 508-6628 juliecorsig@,dwt.com
-&&--d Thomas N. Hanna Attorney at Law P.O. Box 3967 Charleston, WV 25339 WV State Bar # 1581
William R. Atkinson Sprint Nextel 3065 Cumberland Circle Mailstop GAATLD 0 602 Atlanta, Georgia 30339 (404) 649-4882 (0) bill.atkinson@,sprint.com
Attorneys for Petitioner
9 VERIFICATION
State of Kansas 1 ) ss: County of Johnson )
I am authonzed to represent Sprint Long Distance, Inc. and to make this verification on their behalf. The statements in the foregoing document are true of my own knowledge, except as to matters which are herein stated on information and belief, and as to those matters, I believe them to be true.
Name: Richard C. Eckhart I Title: Vice President - Regulatory Affairs
Taken, sworn to and subscribed before me this 7~day of March, 2006.
Notary Public
My Commission expires on the ,mer STATE OF Kansas 1 ) COUNTY OF Johnson 1
VERIFICATION
I am authorized to represent Sprint Nextel Corporation and to make this verification on their behalf. The statements in the foregoing document are true of my own knowledge, except as to matters which are herein stated on information and belief, and as to those' matters, I believe them to be true.
Name: W. RichadMorris Title: Vice President - State Regulatory Affairs
The foregoing instrument was acknowledged before me this day of
MIafch ,2006.
Notary Pubh
My Commission Expires: 9 - I a - 0 B State of Kansas 1 ) ss: County of Johnson 1
VERIFICATION
I am authorized to represent EMBARQ Corporation and to make this verification on its behalf. The statements in the foregoing document are true of my own knowledge, except as to matters which are herein stated on information and belief, and as to those matters, I believe them to be true.
j&J-. . xcw- Name: Richard C. Eckhart Title: Vice President - Regulatory Affairs
The foregoing instrument was acknowledged before me this .7-thday of
,2006. I- ,
Notary Public
My Commission Expires: b2.qacoocl EXHIBIT A
, Financial Statements for Sprint Long Distance, Inc.
170728 Sprint Long Distance Inc. Balance Sheet As of January 31,2006
Current Assets $360,746
Total Assets $360,746
Current Liabilities $141,394 Stockholders' Equity 219,452
Total Liabilities and $360,846 Stockholders' Equity Sprint Long Distance Inc. Income Statement Twelve Months Ended January 31,2006
Net Operating Revenue $448,35 1 Cost of Services and Products 91,292 Operating Income $357,059
Income Taxes $138,431
Net Income $21 8,628 EXHIBIT B
Chart of Corporate Structure Pre- and Post-Transfer of Control
170728 L a,
a, CJx za, CJ .-c L Q cn a, +Ir X za, 4-J .-S I n E 0 I II S 0 mI m n a, v) S .-0 4-J mI 0 n I