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Sprint Nextel silent on report of DT mulling bid
May 06 ,Technology
(AP) -- Sprint Nextel Corp. was silent about its future Monday as reports emerged that the company was considering spinning off or selling Nextel and that Deutsche Telekom AG was investigating a bid to buy the struggling wireless provider.
The Wall Street Journal, quoting unidentified people familiar with the situation, reported that deliberations between Germany's Deutsche Telekom, the parent company of No. 4 wireless company T-Mobile, and Sprint Nextel were at "a preliminary stage and management may very well turn away."
Such a deal would catapult Deutsche Telekom's T-Mobile wireless unit to the top spot in the U.S. market.
Sprint Nextel spokeswoman Leigh Horner said the company had no comment. The Overland Park, Kan.-based company's shares rose 83 cents, or 10.5 percent, to close at $8.72.
Deutsche Telekom did not comment.
Sprint Nextel's faltering stock price and the expected exodus of millions of subscribers this year have caused continued speculation about the company's future.
Qwest Communications International Inc. announced Monday that it would stop reselling Sprint's wireless service and switch to Verizon Wireless. As of the end of last year, Qwest contributed about 824,000 of Sprint's 53.8 million subscribers.
Analysts have disagreed whether the nation's third-largest wireless carrier is ripe for a takeover but have predicted it will begin selling parts of its operation to generate cash and make itself more agile.
Some analysts have speculated that Deutsche Telekom might consider buying Sprint to bulk up and prevent an escalation of flat-rate pricing in the industry.
But the two carriers' technologies are incompatible, a challenge Sprint has already seen enough of in the merger with Nextel.
Jeff Kagan, an independent telecommunications analyst in Atlanta, said the two companies getting together would be much more complicated and difficult than a merger between two U.S. companies.
"Maybe Deutsche Telekom is sending up a few flags to learn what the market actually thinks about a possible deal," Kagan said. "If too much resistance is felt they can simply walk away without a bloody nose. If however there is not much resistance, then it could get interesting."
The Wall Street Journal also reported that Cyren Call, a McLean, Va., company founded by Nextel founder Morgan O'Brien, was trying to assemble a consortium of investors to acquire Nextel, saying it would be part of a plan to create a nationwide wireless network for public safety communications.
The newspaper reported that Sprint could choose to spin off Nextel into a separate company or just transition customers off Nextel's network and onto Sprint's.
Sprint has struggled since acquiring Nextel Communications Inc. in August 2005. In March, it announced it had lost 683,000 wireless subscribers with annual contracts and expected to lose another 1.2 million in the first quarter and a similar amount in the second quarter of 2008.
The sale of the Nextel-branded network, which has seen the largest number of customer defections, could happen if the government would allow such a merger, analysts said.
"In light of the way the current competitive landscape is likely to shape the way policy makers would look at the merger, our sense is that such a deal would be more likely than not to pass muster with the government," Stifel Nicolaus & Co. analysts said in a note to investors on Monday.
Verizon Wireless and various U.S. cable providers, who need wireless in their fight with traditional telephone companies, have also long been named as potential Sprint buyers.
Sprint Nextel is the third-biggest provider of cell phone services in the U.S. and has a market capitalization of approximately $22 billion. AT&T Inc. and Verizon Wireless are the top two U.S. providers.
T-Mobile is No. 4 in the U.S. market, but the unit has proved key to Deutsche Telekom, given that just slightly more than 50 percent of its annual sales now come from markets outside of Germany, its home base. Last year, the company posted sales of $100.8 billion worldwide, including $29.8 billion from T-Mobile.
Deutsche Telekom wrapped up its $1.6 billion purchase of SunCom Wireless Holdings Inc. in February.
© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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