US Sprint Deal to Shuffle Parts of Ownership : United Telecom Would Buy Portion From GTE

The ownership of troubled US Sprint, the nation’s No. 3 long-distance telephone company, would be reshuffled between its 50-50 owners under a $600-million deal announced Monday.

Under the agreement, GTE Corp. would reduce its stake in Sprint to 19.9% by selling most of its interest in the company to United Telecommunications, its partner in the money-losing venture for the past two years. United Telecom’s stake in Sprint would increase from 50% to 80.1%.

Although the deal is not expected to close until Jan. 3, United Telecom will immediately begin running US Sprint, which, like United Telecom, is headquartered in Kansas City, Mo. United Telecom also acquired an option to acquire the remainder of GTE’s interest in Sprint by the end of 1995.

Analysts attributed the move to GTE’s unwillingness to continue taking losses from the joint venture. But both GTE and United Telecom said the transaction was prompted by the venture’s rapid growth, which dictated the need to consolidate management under one of the two partners.

Sprint President Retiring

Sprint’s red ink--and more is forecast when second-quarter results are announced this week--contrasts sharply with the growing profitability of the No. 2 long-distance carrier, MCI Communications Corp. MCI on Monday reported net income for the three months ended June 30 of $73 million on revenue of $1.2 billion.

In a related move that surprised some analysts, Sprint’s 62-year-old president, Robert H. Snedaker, announced that he will go into early retirement Aug. 15. Snedaker will be succeeded temporarily by United Telecom President and Chief Executive William T. Esrey. Meanwhile, United Telecom Chairman Paul H. Henson will assume Esrey’s duties at the parent firm.

Snedaker took over the leadership of US Sprint last summer when Charles Skibo abruptly resigned as president after the company announced a $350-million pretax charge against earnings, partly due to customer billing problems. Snedaker had been United Telecom’s vice chairman and chief operating officer.

“We owe him a great debt of gratitude for putting US Sprint’s operations back on track,” Esrey said of Snedaker, who saw Sprint through the completion of a new nationwide fiber-optic

First-Quarter Losses

Nonetheless, the timing raised some eyebrows in the investment community. “If things are going so well and the company’s on the verge of turning around,” asked one analyst, “why does the former vice chairman of United Telecom suddenly take retirement, and why is United’s president taking over?”

US Sprint lost $138 million in the first quarter of this year after having lost $800 million in 1987--losses shared equally by the two partners. But a spokesman for GTE at company headquarters in Stamford, Conn., denied that losses had triggered the sale.