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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 22, 1995
SPRINT CORPORATION
(Exact name of registrant as specified in its charter)
Kansas 1-4721 48-0457967
(State of (Commission (IRS Employer
Incorporation) File Number) Identification
Number)
2330 Shawnee Mission Parkway, Westwood, Kansas 66205
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(913) 624-3000
P. O. Box 11315, Kansas City, Missouri 64112
(Mailing address of principal executive offices)
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Item 5. Other Events
On June 22, 1995, the registrant announced that the
registrant, Deutsche Telekom and France Telecom had signed a
definitive joint venture agreement for a strategic alliance that
will provide seamless global telecommunications services to
business, consumer and carrier markets worldwide. The parties
also announced that they had reached agreement on terms by which
Deutsche Telekom and France Telecom will purchase a 20 percent
equity investment in the registrant. Additional information
concerning the joint venture and the equity investment is
contained in the news release, a copy of which is filed as
Exhibit 99 hereto and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
99. News Release Relating to the Global Strategic
Alliance and Financial Investment.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
SPRINT CORPORATION
By /s/ Michael T. Hyde
Michael T. Hyde
Assistant Secretary
Dated: June 27, 1995
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EXHIBIT INDEX
Exhibit
Number Exhibit
99. News Release Relating to the Global Strategic Alliance
and Financial Investment.
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Exhibit 99
Contacts: Sydney Shaw, (O) 202-828-7428; (H) 202-547-2776
Bill White, (O) 913-624-2226; (H) 913-681-9099
For Immediate Release
SPRINT, DEUTSCHE TELEKOM, FRANCE TELECOM
AGREE ON TERMS FOR GLOBAL STRATEGIC ALLIANCE
AND FINANCIAL INVESTMENT
NEW YORK, June 22, 1995 -- Sprint, Deutsche Telekom
and France Telecom today signed a definitive joint venture
agreement for their strategic alliance that will provide seamless
global telecommunications services to business, consumer and carrier
markets worldwide. The parties also reached agreement on
terms by which Deutsche Telekom and France Telecom will purchase a
20-percent equity investment in Sprint, which would include 86.2
million shares of newly-issued Sprint stock.
"This agreement is an important step toward our goal of
creating the new, world-class global venture we announced
last year," said William T. Esrey, chairman and chief executive
officer of Sprint. "We are focused on offering advanced
telecommunications services to consumers, businesses and
other telecommunications carriers around the globe. Through
efficiencies and economies of scale, the venture will be able
to offer customers more choice of services at lower prices."
Said Marcel Roulet, chairman of France Telecom: "I have
always been convinced that even large telecommunications
companies such as France Telecom cannot act alone to provide the
quality services customers around the world expect. In joining with
Deutsche Telekom, our Atlas venture is structured to deliver
quality services at lower costs to corporate customers. The
alliance with Sprint will enable us to address the needs of
customers around the world with a truly global product
offering."
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"This joint venture will be a major force from its very
first day of operation," said Dr. Ron Sommer, chairman of the Board
of Management of Deutsche Telekom AG. "We immediately will have
points of presence all around the world."
The venture will be directed by a Global Venture Board
which will determine strategic direction and oversee operations.
The three parties will have equal votes on the Global Venture
Board. The operating group serving Europe (excluding France and
Germany) will be owned one-third by Sprint and two-thirds by
Deutsche Telekom and France Telecom. The interests of
Deutsche Telekom and France Telecom in the venture are expected
to be managed by their own joint venture, referred to as Atlas.
The unit for the worldwide activities outside the United States
and Europe will be owned 50 percent by Sprint and 50 percent
by Deutsche Telekom and France Telecom through Atlas.
Global backbone network functions, originally planned to be
performed by a third operating group, will be performed instead
by the two operating groups.
Consistent with the June 14, 1994 Memorandum of
Understanding (MOU), Deutsche Telekom and France Telecom
together will purchase from Sprint 86.2 million shares of a new
Class A common stock. This investment now will be made in a
single purchase, rather than in two separate purchases as
announced in the 1994 MOU. France Telecom and Deutsche
Telekom were to have made their investment in two equal
tranches of 42.9 million shares, the first at $47.225 per share
(approximately $2 billion), and the second investment
coming two years after the initial investment at a price of $51
per share (approximately $2.2 billion).
A detailed description of the financial terms announced
today is included in an attachment to this release. Below are the
highlights of the new terms.
Deutsche Telekom and France Telecom will purchase all 86.2
million shares of Sprint Class A common stock at the MOU
price of $47.225 per share ($4.1 billion) if the 20-day average
trading price of Sprint stock prior to the venture closing is within
a range of $34.982 per share and $37.780 per share. If the
market price is above $37.780 per share, France Telecom and
Deutsche Telekom would pay a 25 percent premium up to a
maximum of $48.704 per share or $4.2 billion. If the Sprint
market price is below $34.982 per share, Sprint can defer the
investment in Class A common stock for up to two years to allow
the market price to reach
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$34.982 per share, at which point Deutsche Telekom
and France Telecom would be obligated to purchase shares at
$47.225 per share. If the investment in Class A common stock
is deferred beyond the venture closing, Deutsche Telekom and
France Telecom would make a $1.5 billion investment in convertible
preferred shares as an interim investment vehicle. Other
purchase terms are detailed in the attachment.
Last week, the Sprint board of directors announced it is
studying strategic options for Sprint Cellular, including a
possible spinoff of the unit to shareholders. If Sprint
elects a spinoff, Deustche Telekom and France Telecom
would not have an investment in the spun off company.
The investment in Class A stock by Deutsche Telekom and
France Telecom would be deferred until the spinoff is
completed and Deutsche Telekom and France Telecom
would purchase from $1.5 billion to $3 billion of Sprint
preferred stock as an interim investment. If Sprint's common
stock is within the range of $34.982 and $37.780 at venture
closing and a spinoff does occur, then assuming that
approximately $1 billion of debt remains with the cellular
unit, the ultimate investment to be made by Deutsche Telekom
and France Telecom would be approximately $3.5 billion.
The actual amount could vary depending on the market price
of the cellular spinoff company. A detailed description of
these terms is included in the attachment.
As part of the joint venture formation, each of the parties
will contribute most of their existing operations outside
their respective home countries. Based on the agreed upon
valuation of those operations, Deutsche Telekom and France
Telecom together will have a true up obligation of approximately
$675 million to the venture.
The proposed investment entitles Deutsche Telekom and
France Telecom to a minimum of two board seats and the same approval
rights as in the original MOU.
Sprint, Deutsche Telekom and France Telecom intend to
combine planning for global network facilities. Existing
correspondent bilateral relationships will remain in place.
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Subject to relevant regulatory requirements, the services
the parties expect to provide will include:
- Global international data, voice and video business
services for multinational and large business
customers, as well as for the burgeoning number
of small companies with international communications
needs.
- International services for consumers, initially based on
card services for travelers.
- "Carriers' carrier" services, providing international
transport services for other carriers.
The activities of the venture will expand to address the
changing dynamics of global, regional and national markets
over the medium- and long-term. The venture plans to develop
national networks to provide long distance services in other countries
as required by customers. The venture will deliver services
within 50 days of regulatory and shareholder approvals. The new
globa alliance will begin operations with more than 2,000
employees, almost 1,200 switching centers or points of presence, 23
customer service centers and six network management centers. The
venture is expected to begin operations with approximately $500
million in customer revenues, based on 1995 estimates.
The alliance among Deutsche Telekom, France Telecom and
Sprint already has been cleared by the Committee on Foreign
Investment in the United States. Review is also underway by
the Department of Justice and the Federal Communications
Commission. The parties will file within a week for formal review by the
European Commission. Completion of the transaction is
contingent on receiving these and other government approvals, including
approval of the Atlas transaction by the EC.
Final agreement is subject to approval by the governing
board of France Telecom. Sprint shareholders must approve the
terms of the definitive investment agreements, which are expected to
be signed within several weeks.
Sprint is a diversified international telecommunications
company with more than $12.6 billion in annual revenues and
the United States' only nationwide all-digital, fiber-optic
network.
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Its divisions provide global long distance voice, data and
video products and services, local telephone services to more than
6.4 million subscriber lines in 19 states, and cellular services
to more than 1 million customers in nearly 100 cities in 14
states.
With 1994 consolidated annual revenues of $28.5 billion,
net income of $2 billion, and almost 32 million telephone lines
in service, France Telecom is the world's fourth largest
telecommunications operator. In addition to local and long
distance switched voice, France Telecom provides businesses
and consumers with pay telephones, leased lines, customized data
networks, wireless and cable television services. France
Telecom has been active in foreign telecommunications markets
for decades and has acquired substantial global experience offering
basic telephony and value-added services. The company is a
significant force in the development of telecommunications networks
in several countries. France Telecom has almost 168,000
employees worldwide, with offices and subsidiaries in more than
30 major cities in North America, Europe, the Asia-Pacific region
and Latin America.
With revenues of $44 billion in 1994 and a staff of
220,000, Deutsche Telekom is Europe's largest telecommunications
company and the second largest carrier in the world. Offering a
complete range of products and services, Deutsche Telekom along
with its subsidiaries in the Telekom Group, is a leader in the field
of mobile radio services, has an extensive cable television
network connected to over 15 million homes and is also the world's
first carrier to have sold over 2 million B-channels in ISDN
technology. And, finally, with 87,000 kilometers of fiber optic channels
installed, Deutsche Telekom is exceptionally positioned to
provide multimedia services across information highways.
Additional Contacts:
Klaus Czerwinski, Deutsche Telekom, 49-228-181-4949
Bruno Janet, France Telecom, 33-1-44-44-93-93
Sydney Shaw or Steve Dykes, Sprint, 212-350-6622 (June 22)
Vince Hovanec, Sprint, 202-828-7410
* Attached is a Sprint Corporation description of the terms
of the investment.
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SPRINT CORPORATION
DESCRIPTION OF FINANCIAL TERMS
A. Introduction
The new financial terms differ from those contained in the
June 1994 Memorandum of Understanding ("MOU") in two
principal respects. First, they eliminate the two tranche investment
contemplated by the MOU in favor of a single tranche
investment in Sprint Class A common stock by Deutsche Telekom
and France Telecom, with the purchase price to be determined
based on the market price of Sprint common stock. An interim
investment in Preferred Stock is also provided for if certain
trading market thresholds for Sprint common stock have not been
met at the time of the Venture closing. Secondly, the new financial
terms address the effect on the investment of a possible spinoff
of Sprint's cellular operations. In general, the revised terms
contemplate that the investment price to paid by Deutsche Telekom
and France Telecom will be reduced to reflect the fact that they will
not participate in an investment in the spun off entity ("Spinco").
The amount of such reduction will be based on an agreed per share
reduction factor, which will vary if the actual trading prices for
Spinco vary from the agreed reduction factor by more than
certain specified amounts.
B. Revised Investment Principles (Assuming No Cellular
Spinoff)
The new terms include various purchase options depending on
the average closing price of Sprint common stock over the 20
trading days ending 15 business days prior to the Venture
closing. If the average price of Sprint common stock is within a
collar bounded on the low end by $34.982 per share and at the upper
end by $37.780 per share, the investment would be made in Class A
common stock at $47.225 per share for a total investment of
approximately $4.1 billion. If the price is above $37.780,
the investment would close at a 25 percent premium, up to a
maximum of $48.704 per share or $4.2 billion.
If the market price of Sprint common stock at the time of
the Venture closing is less than $34.982, Sprint can defer the
sale of Class A common stock for up to two years to allow the Sprint
common stock to reach an average closing price of $34.982 for
20 consecutive trading days, at which point Deutsche Telekom and
France Telecom would acquire the Class A common stock at
$47.225 per share. In the event of such a deferral, shares of Sprint
preferred
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stock would be issued as described below. At any time
during the two year period, Sprint can require that Deutsche
Telekom and France Telecom acquire Class A common stock at a
premium of 35 percent over the average closing price of
Sprint common stock for a 20 trading day period. Also, during this
two year period, Deutsche Telekom and France Telecom can elect
to acquire the Class A common stock at $47.225 per share.
If the Class A common stock acquisition has not occurred
within the two years of the Venture closing and the average Sprint
market price over a 20 trading day period reaches $32.641 per
share, the Class A common stock acquisition would be made at
$44.065 per share, or an aggregate of $3.8 billion. If the average
Sprint market price is less than $32.641 at the end of the second
year, Sprint can delay the investment in the Class A common stock
for up to three more years. If during this three year period the
average closing price reaches $32.641 per share, the Class A
common stock would be acquired at $44.065 per share. At any time
during the second deferral period, Sprint can elect to close at a
35 percent premium to market or Deutsche Telekom and France
Telecom can elect to close at $44.065.
If the Class A common stock acquisition does not occur at
the time of the Venture closing, Deutsche Telekom and France
Telecom would purchase $1.5 billion in Sprint convertible voting
preferred stock. The preferred stock would pay a dividend of
approximately 2.9 percent for the first two years, with the dividend
rate reset to the prevailing market rate for the following three years.
The purchase of Sprint preferred stock by Deutsche Telekom and
France Telecom will entitle the two companies to two board seats,
certain approval rights, and voting rights equivalent to an
investment of $1.5 billion in Sprint common stock at a 35 percent
premium to market at the time of the Venture closing. The
preferred stock would convert to Class A common stock at the
time of the acquisition of Class A common stock in accordance
with the pricing formulas described above, with the balance of the
shares of Class A common stock to be purchased with cash as
provided above. If the Class A common stock purchase does not
occur within five years, the preferred stock would be redeemed and
the right to board seats and approval rights would then terminate.
C. Spinoff of Cellular Operations
The parties have also agreed on specific terms for
adjusting the purchase price of the Class A common stock
if Sprint elects to spin off
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its cellular operations to its shareholders. Deutsche Telekom
and France Telecom will not be purchasing shares nor will
they have governance rights with regard to Spinco.
Effect on Collar and Investment Prices -- Upon the
occurrence of a cellular spinoff, the purchase prices of the
Sprint Class A common stock would be reduced to reflect the
fact that the value of cellular is no longer included in Sprint's
common stock. In general, the $47.225 target price would be
reduced by 130% of the "Spinoff Reduction Factor" and the
$48.704 maximum price would be reduced by 125% of the
Spinoff Reduction Factor. The Spinoff Reduction Factor is
a per share amount calculated as described below under the
caption "Spinoff Reduction Factor." However, if, at the time of
the Venture closing, the spinoff has not been effected and the
Sprint market price is within the original collar of $34.982 to
$37.780, the investment price would be reduced by the Spinoff
Reduction Factor multiplied by a premium percentage equal
to the premium to the Sprint market price that would have been
paid by France Telecom and Deutsche Telekom if the
investment in Class A common stock had taken place.
If the cellular spinoff has occurred prior to the Venture
closing, or if the spinoff occurs after the Venture closing
(but when the Sprint common stock price was below $34.982 at the
Venture closing) the $34.982 to $37.780 collar will be
reduced. In general, the lower end of the collar will be reduced from
$34.982 to the new target price divided by 1.35. In addition, the
upper end of the collar will be reduced from $37.780 to the new
target price divided by 1.25. For example, if the Spinoff Reduction
Factor is $5.25 the new target price would be $40.40 and the
new collar would range between $29.926 and $32.32.
Consistent with the principles applicable if the spinoff does
not take place, the collar would be further reduced if the
purchase price has not been fixed prior to the second
anniversary of the Venture closing.
Spinoff Reduction Factor -- So long as the average market
price of Spinco during the 20 trading days following the
spinoff is between $3.25 and $7.25, the Spinoff Reduction Factor
will be $5.25. If such average Spinco market price is above
$7.25 but not more than $8.25, the Spinoff Reduction Factor
will be increased by 50 percent of the difference between such
price and $7.25, and if such price is above $8.25, the Spinoff
Reduction Factor will equal $5.75 plus 100 percent of the difference
between such price and $8.25. Likewise, the specified reductions
to the Spinoff Reduction Factor would be made if the average
Spinco market price is below $3.25. Moreover, the Spinoff
Reduction Factor and the ranges described above were
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determined based on the assumption that Spinco would have
indebtedness (net of cash) of approximately $1 billion. In
addition, if the spinoff is effected other than through a distribution
of one share of Spinco for each share of Sprint, appropriate
adjustments will be made to such figures.
Timing of Investment -- If the spinoff occurs prior to the
Venture closing and the average Sprint common stock price
over the 20 trading days ending 15 business days prior to the
Venture closing is within or above the post-spin collar immediately
prior to the Venture closing, Deutsche Telekom and France Telecom
would purchase Sprint Class A common stock concurrently with the
Venture closing. On the other hand, if the average Sprint common
stock price over the 20 trading days ending 15 business days prior
to the Venture closing is below the post-spin collar at the time
of the Venture closing, Deutsche Telekom and France Telecom
would instead purchase $1.5 billion of convertible preferred stock,
and the common stock investment would be made when the post-spin
collar is reached in a manner described in Section B above.
If the spinoff has not occurred prior to the Venture closing
and the average Sprint common stock price over the 20 trading
days ending 15 business days prior to the Venture closing is
within or above the original collar, Deutsche Telekom and France
Telecom will initially purchase convertible preferred stock with a
face value of between $2 billion and $3 billion, as determined by
Sprint, which will be convertible into Sprint Class A common
stock when the spinoff occurs or is abandoned. If the spinoff
subsequently occurs, the preferred stock will convert and
Deutsche Telekom and France Telecom will purchase the balance
of the Sprint Class A common stock at a price reduced by the
Spinoff Reduction Factor (adjusted as set forth in the paragraph
titled "Effect on Collar and Investment Prices"). A mechanism
has been provided to defer conversion, if necessary, so that the
premium paid by Deutsche Telekom and France Telecom will
not exceed 35 percent.
If the spinoff has not occurred prior to the Venture
closing and the average Sprint common stock price over the 20
trading days ending 15 business days prior to the Venture closing
is below the original collar, Deutsche Telekom and France Telecom
would purchase $1.5 billion of convertible preferred stock, and the
purchase price of the Sprint Class A common stock would be
fixed once the collar has been reached. The preferred stock will
convert and the Class A common stock investment would be made
when the spinoff occurs. If in such case the collar is reached
before the spinoff has occurred, the preferred stock investment of
Deutsche Telekom and France Telecom would be increased to a
total of between $2.0 billion and $3.0 billion, as determined by
Sprint.
