Sprint will pay $131 million to settle a class-action lawsuit which accused the company of falsely claiming it was receiving billions of dollars of benefits from its $36 billion merger with Nextel Communications, Reuters reported.

Officials of the company including former CEO Gary Forsee were alleged to have inflated the company’s stock and bond prices between October 2006 and February 2008.

The report noted that Sprint had said it was improving its subscriber base as a result of the deal, when actually it was struggling to integrate networks and losing subscribers. The troubles resulted in a $29.7 billion goodwill writedown in early 2008.

The payout represents 12.1 per cent of the estimated $1.079 billion of damages.

Sprint spokeswoman Stephanie Vinge told Reuters that the company decided to settle to avoid the cost of litigation, adding that “Sprint has and will continue to operate in complete adherence with all federal securities laws”.