That works out to $24 per share in cash for iPCS. This is a 34 percent premium over the company’s closing price of $17.88 per share on Friday, but perhaps a small price to pay for putting an end to the two iPCS lawsuits–one over Sprint’s acquisition of Virgin Mobile, the other over its investment in Wimax operator Clearwire.

As a result of the iPCS deal, Sprint (S) will no longer be required to divest its iDen network in certain iPCS (IPCS) territories, though iPCS had won a court ruling requiring Sprint to do so. Now, Sprint will not only keep those assets, it can peddle their services to some 700,000 iPCS customers in a territory that covers 81 markets in seven states.

Below, the official announcement:

Sprint Nextel to Acquire Wireless Affiliate iPCS, Inc.

More than 700,000 PCS Wireless Users and 270,000 Wholesale Customers to Become Sprint Direct Subscribers
Extends Company’s Direct Service Territory to an Additional 12.6 Million People
Sprint Ends Plan to Divest iDEN Network Assets in Certain Midwestern States Pending Transaction Close
OVERLAND PARK, Kan. & SCHAUMBURG, Ill.–(BUSINESS WIRE)–Oct. 19, 2009– Sprint Nextel Corp. (NYSE: S) and iPCS, Inc. (NASDAQ: IPCS) today announced an agreement for Sprint Nextel to acquire iPCS for approximately $831 million, including the assumption of $405 million of net debt. This transaction value represents 6.4x projected 2010 Adjusted Earnings Before Income, Taxes, and Depreciation (“Adjusted EBITDA”*). Sprint expects to achieve approximately $30 million of synergies annually in the transaction and expects the transaction to be free cash flow accretive to Sprint in 2010.

Under the terms of the agreement, Sprint Nextel will commence a cash tender offer to acquire all of iPCS’ outstanding common shares for $24.00 per share. This price per share represents a 34 percent premium to iPCS’ closing stock price as of October 16, 2009. The agreement also requires a minimum of a majority of the shares outstanding (on a fully-diluted basis) to be tendered in the offer. Following completion of the tender offer, any remaining shares of iPCS will be acquired in a cash merger at the same price per share. Shareholders with approximately 9.5 percent of the outstanding common shares of iPCS have already agreed to tender their shares pursuant to the tender offer and to vote their shares in favor of the merger.

The acquisition is subject to customary regulatory approvals and other customary closing conditions, and is expected to be completed either late in the fourth quarter of 2009 or early 2010. As part of the agreement, Sprint Nextel and iPCS will seek an immediate stay of all pending litigation between the parties with a final resolution to become effective upon closing of the acquisition.

As a result, Sprint will no longer be required to divest its iDEN network in certain iPCS territories and will terminate its previously announced divestiture process pending closing of the transaction.

iPCS’s services are sold under the Sprint brand name and in Sprint-branded stores. Because of the nearly seamless marketing and sales relationship between Sprint and iPCS, customers should not experience any change in their service as a result of this transaction.

“Acquiring iPCS brings added value to Sprint by expanding our direct customer base, growing our direct coverage area and simplifying our business operations,” said Dan Hesse, CEO of Sprint Nextel. “Customers in iPCS territory will see a seamless transition and continue to enjoy a superb customer experience.”

“We are very pleased to have reached this agreement with Sprint Nextel. Given the increasingly competitive landscape, we believe this is an opportune time to provide our shareholders with a liquidity event at a very attractive price. iPCS shareholders will receive a significant and immediate premium for their shares and our customers will continue to receive the same excellent service from the same dedicated people who provide that service today,” said Timothy M. Yager, president and CEO of iPCS. “We look forward to working with the Sprint Nextel team to ensure a smooth completion of the transaction and transition in the coming months.”

Reporting second-quarter earnings this morning (release, investor presentation), Sprint (S) posted a loss of $384 million, or 13 cents a share as customers defected to rival carriers. Revenue tumbled 10 percent to $8.14 billion.

Analysts surveyed by Thomson Reuters expected a loss of two cents on revenue of $8.13 billion.

A nasty miss, and one made worse by the loss of 991,000 subscribers in the crucial postpaid category. This after the troubled wireless carrier lost more than one million postpaids in the first quarter of 2009 and 1.27 million in the quarter prior to that. Sprint’s total subscriber count today: 48.8 million. As I said earlier this year, Sprint is hemorrhaging subscribers like Dan Ackroyd’s exsanguinating Julia Child.

And the Pre hasn’t done much to stanch the bleeding, though CEO Dan Hesse says Palm’s (PALM) smartphone has helped some. “In the second quarter, we made further progress on our efforts to enhance financial stability, improve the customer experience and reinvigorate the brand,” he said in a statement. “The widespread visibility surrounding our record-breaking June launch of the Palm Pre handset gave us an unprecedented opportunity to showcase these improvements to customers as ‘a new Sprint.’”

Indeed. Too bad so few people seem to be interested in them.

UPDATE:
During a conference call with analysts, Hesse suffered a barrage of questions about the Pre, its sales and how Sprint is faring against the iPhone 3GS. He declined to provide sales figures for the Pre and said only that its introduction has helped stave off customer churn. “I don’t want you to think there’s no impact from the iPhone,” he said. “It’s a successful device, but we’ve mitigated the impact with a strong device lineup.”

This morning, Sprint Nextel said it will acquire Virgin Mobile USA in a $483 million stock deal that will give the company a clear lead in the prepaid arena, where low prices are becoming ever more popular with consumers beaten into submission by the continuing recession.

For Sprint (S), which already owns 13.1 percent of Virgin Mobile and which allows the mobile virtual network operator to use its network, this is a wise move. It brings to the company some five million customers who are already using its network, and more than doubles the size of its prepaid business, Boost, which has recently had quite a bit of success.

“The acquisition of Virgin Mobile USA positions Sprint for even greater success in the prepaid wireless segment,” Sprint CEO Dan Hesse said in a statement. “Prepaid is growing at an unprecedented rate with consumers keenly focused on value. Virgin Mobile is an iconic brand in the marketplace that will complement our Boost Mobile brand.”

That said, the deal is not without its difficulties, as Bernstein analyst Craig Moffet explained in a research note this morning.

“The acquisition nudges Sprint further along in its metamorphosis into a prepaid and wholesale operator,” he wrote. “However, this deal, and the strategy shift in general, does nothing to address the key issue that Sprint faces, namely the continuing meltdown of its much higher value postpaid business. Closing the deal and integrating Virgin may consume management’s time and distract them from what should be their primary focus.”

“Our channel checks suggest sales of the Pre have indeed slowed. Store traffic at Sprint stores has declined since mid-June,” Harris wrote. “The Pre, which initially was not available for online purchase from Sprint’s website, became available last week. We believe a majority of the Pre sales have been made either to existing Palm users or Sprint subscribers. It also appears not to have been as successful as the iPhone in terms of winning subscribers from other carriers.”

Harris notes that even Sprint (S) CEO Dan Hesse seems uncertain of the device’s true impact in the market. Speaking at Fortune’s Brainstorm: Tech conference in Pasadena, Calif., last week, Hesse said of the Pre: “You won’t know if we have a real hit on our hands until its been out three months, four months, five months….It’s too early to tell….We’re just getting it rolled out in decent quantities for direct distribution.”

An interesting admission. That said, the Pre did set record first-day and weekend sales for Sprint, And according to the channel checks of some other analysts, sales are not slowing. Fact is, we won’t know for sure until Palm (PALM) and Sprint go on record with real sales metrics–as Sprint may do later this week when it reports earnings.

One last point worth noting here: CL King’s note arrives amid widespread reports this morning of a Best Buy promotion that cut the Pre’s price to $99 with a two-year contract. Though the retailer dismissed the cut as an “unintentional pricing error” and promptly withdrew it, a number of Pres appear to have been sold at that price across the country.

Odd that such an accident would occur nationwide complete with in-store pricing sheets, isn’t it? Makes you wonder if someone jumped the gun on a forthcoming promotion and if we’ll see the Pre at $99 before the end of summer. And if we do, at what price will the Eos/Pixie–the Pre’s rumored little brother–be sold? $49.99?

“We still have a backlog of subscribers but it’s not unmanageable and we get shipments every week. We’ll be short for a while but we’re catching up.”

– Sprint Nextel CFO Bob Brust, June 24, 2009

[This post was updated at 12:36 with comment from Sprint.]

Sprint best step up its marketing efforts for the Pre because according to Pali Research, demand for Palm’s new device is slowing, and quickly.

During the week ending June 26, Pali estimates that Sprint sold 50,000-60,000 Pre handsets. In the weeks that followed, Sprint sold “less than 40,000,” and then, “over 30,000”–again, according to Pali. Now the research outfit says Pre sales have declined by another 5,000 units.

“We really aren’t sure what Sprint is waiting for in stepping up the ad campaign but Palm Pre sales have continued to slow over the past two weeks and we believe Sprint is currently selling roughly 25,000 per week, down from over 30,000 two weeks ago and over 50,000 in late June,” Pali analyst Walter Piecyk said in a research note this morning. “Advertising could increase in the coming weeks but we are headed into August and there is a new BlackBerry now vying for the attention of wireless customers.”

And don’t forget that $99 Apple iPhone 3G.

Piecyk concludes by suggesting that Sprint (S), by failing to market the hell out of the Pre, is fumbling the best opportunity to come its way in a while.

“Slowing sales cannot be helping CEO Dan Hesse’s ability to extend the exclusive period for the Pre as Palm (PALM) likely views a Verizon launch as something that could materially stimulate sales,” Piecyk said.

“Hesse has never been one to resort to price cuts but we wonder if dropping the Pre to $99 could reignite sales,” the analyst continued. “…Sprint’s future is certainly not tied to the Pre but this is a great product that could highlight their data network. We believe they are squandering this opportunity over the past few weeks. Sprint is still not in a strong enough position to let good opportunities pass them by.”

And what does Sprint think of that assessment? Not much. Reached for comment, a spokesperson told me: “we are very pleased with the performance of the Pre and the excitement it’s drawn; we are selling all the quantities that are being delivered to us and we are ramping up advertising this month — did you see the full-page ads this week comparing the value and performance of the Pre to the iPhone? — and we are expanding availability of the handset at Best Buy, Radio Shack and online, with future expansion of availability planned. As Dan Hesse noted in California today, it takes a number of months — through a whole ramped-up sales cycle — to determine the real performance of a handset in the marketplace. Folks like to speculate and toss around ideas on the internet all the time, but the truth is Sprint is very happy with how the Pre is doing.”

Now, we aren’t typically the carrier that comes out and announces what we are going to be selling 12 months from now. Other carriers do that, and the media loves to speculate on what we are bringing to market. But what I will tell you is that over the next six months or so you will see devices like the Palm Pre and the Cousin on our network from Palm.

– Verizon CEO Lowell McAdam

When Verizon Wireless CEO Lowell McAdam claimed his company would be selling the Palm Pre six months from now, he was apparently as full of it as a dairy farm manure spreader. At a Palm Pre launch event in New York city (at the Palm Room in the Roosevelt Hotel, wink, get it?), Sprint CEO Dan Hesse dismissed McAdam’s claim as inaccurate. “They need to check their facts,” he said. “That just is not the case. Both Palm (PALM) and Sprint (S) have agreed not to discuss the length of our exclusivity deal — but I can tell you it’s not six months.”

It would seem then that we will not be seeing “devices like the Palm Pre and the Cousin” — whatever that is — on Verizon (VZ) before the end of the year, although we may well see them in 2010.

Interesting thing to say in advance of a product launch on which so much is riding, don’t you think? Unless you’re already trying to foster the perception of excess demand. As Gartner analyst Hugues De La Vergne noted last month, “It’s important to have a success like selling out. The Pre has to live up to the hype or else they’ll lose their momentum to rival products coming out soon after.” And clearly, that’s a very real danger here. Though, to be fair, there are other possible explanations. It could simply be responsible production scheduling. It might also be that Palm’s financial situation has forced the company to temper its launch run-rate in order to retain adequate capital for marketing and customer service. Or it could be that Pre really is the blockbuster device Palm (PALM) and Sprint (S) believe it to be and no amount of supply will be enough to meet the initial and overwhelming demand for it. It could be that the Pre is the next Apple (AAPL) iPhone.

“What the iPhone has shown is that if you really do have a compelling device that is revolutionary then customers will switch to your service,” said Hesse. “We think the Palm Pre stacks up very well against the iPhone.”

We’ll find out come June 6.

Indeed. Because while Sprint (S) offset many of those postpaid defections with big gains in the prepaid and wholesale markets–the company lost only 182,000 subscribers, net, thanks to additions from Boost Mobile and to its partnership with Amazon (AMZN) for the Amazon Kindle–postpaid subscribers are the industry’s most valuable. They usually spend more on their service, and because they’re typically bound by contract, they’re less likely to cancel service as customers who aren’t. So, the fact that Sprint’s postpaid subscribers have been fleeing the company in droves for six straight quarters is not a good sign. That said, this is the the largest quarter-to-quarter improvement in net customer additions at Sprint Nextel in recent memory (click on chart below), so things are improving, if only a bit.

Sprint posted a loss of $594 million or 21 cents per share in its first quarter, a decline of 18 percent, compared with a loss of $505 million or 18 cents per share for the same period a year ago. Revenue was $8.21 billion, down about 12 percent, and a fair bit less than the $8.28 billion analysts had been expecting.

One hopes the debut of Palm’s (PALM) new Pre handset in the months ahead will do something to change that.

Sprint Nextel has been hemorrhaging subscribers like Dan Ackroyd’s exsanguinating Julia Child for the past several quarters and its latest one was no different. Announcing fourth-quarter results that, remarkably, came in ahead of expectations, the much diminished wireless carrier said it lost 1.27 million customers during the period, for a loss of 4.58 million subscribers in 2008. Sprint ended the year with 49.3 million wireless customers, down 8.4 percent from 53.8 million customers at the end of 2007.

Ugly.

That said, Sprint’s (S) fourth-quarter net loss was narrower than expected–excluding write-downs, it came in at one cent per share, beating analysts’ expectations of a loss of three cents per share. According to Sprint CEO Dan Hesse, there’s some hope in that. “Subscriber losses and revenue declines are obviously unacceptably high,” he said during the company’s earnings call. “But it takes time for perceptions about our customer care and financial stability to catch up to the reality.”

Indeed.

Hopefully, the debut of Palm’s (PALM) new Pre handset later this year will do something to further that. Company expectations for it are clearly quite high. Said Hesse, “We are bullish about the potential for this device.”

Sprint’s long-suffering shares rose 64 cents, or 24 percent, to $3.35 in early morning trading.

PREVIOUSLY:

• Sprint: Tourniquet, Please…
• Sprint Prepares for Launch of Palm Pre With Massive Layoffs

“Labor reductions are always the most difficult action to take, but many companies are finding it necessary in this environment,” Sprint CEO Dan Hesse said in a statement announcing the layoffs. “We continue to improve the customer experience, and these improvements are reflected in much higher levels of satisfaction in customer surveys and in independent performance tests. Our commitment to quality will not change.”

Yeah, well, your commitment to quality might not change, but quality itself certainly will. A 14.3 percent reduction in workforce isn’t likely to improve Sprint’s customer experience, now is it?

“It’s a difficult industry in which to shrink your way to greatness,” said Stifel Nicolaus analyst Christopher King. “Investors would much rather see the company growing this business, hiring people.”

With the launch of the Pre approaching, Palm surely would as well.

[Image credit: MSN Money]

Looking over the company’s financials today, I’d say the corner to which he refers isn’t even in sight yet. If anything, Sprint (S) appears to be heading down one of those bleak midwestern straightaways–in this case, jammed with the traffic of its fleeing subscribers. In its third quarter, Sprint Nextel failed to even meet Wall Street’s much diminished expectations. It reported an operating loss of $326 million, pushing its net losses to more than $1.1 billion for the year.

Worse, the company said it lost 1.3 million customers in the third quarter. And that is truly ugly news for Sprint, which has been hemorrhaging subscribers like Dan Ackroyd’s exsanguinating Julia Child. In the past two years, the carrier has lost almost four million customers. And try as it might to reverse that trend, it seems destined only to shed more. Being ranked as the carrier with the lowest customer satisfaction in a survey by J.D. Power & Associates isn’t exactly going to send new subscribers flocking to Sprint.

“Sprint, at this point, is clearly a show-me story, and I’d like to see tangible evidence that the company is successfully executing,” Stanford Group analyst Michael Nelson told Bloomberg. “We’re not willing to give them the benefit of the doubt.”

Shares of Sprint are plumbing the lower depths at $3.30 as I write this, down 10.33 percent.