Sprint in M&A play, shares surge

By Sinead Carew and Ritsuko Ando

NEW YORK (Reuters) - Reports of a possible sale of Sprint Nextel Corp (S.N) to Deutsche Telekom AG (DTEGn.DE) or a Nextel unit spinoff raised hopes of a reprieve for the embattled mobile operator, lifting its shares 10 percent.

But analysts said such deals would be difficult. A Deutsche Telekom deal would require integrating incompatible networks and face a tough antitrust review and a Nextel spinoff would also mean an overhaul of billing and retail operations.

A source close to Deutsche Telekom told Reuters on Monday that the company had been looking at Sprint since it announced a huge write-off in February. German magazine Der Spiegel had also said Deutsche Telekom was eyeing a takeover or merger.

The Wall Street Journal said Sprint was considering spinning off or selling its Nextel unit and that said Cyren Call, a company founded by Nextel founder Morgan O'Brien, was trying to assemble a group of investors.

"The spinoff of Nextel would be very complicated," said Stifel Nicolaus analyst Chris King.

"Other than the cheap dollar I can't find a logical reason Deutsche Telekom would have an interest in a poorly performing U.S. company with a different technology," he said.

Aside from its floundering share price, M&A speculation has also arisen from Sprint's search for funding to support its costly investment in WiMax, an emerging high-speed wireless technology it has said it will use for an advanced network.

Sprint is close to a long-expected deal to create a WiMax joint venture with Clearwire Corp (CLWR.O) with $3 billion funding from cable companies, Intel Corp (INTC.O) and Google Inc (GOOG.O), a source familiar with the matter told Reuters.

King said that of the various possible deals, this was the most likely to succeed.

Sprint shares closed up 10.5 percent on the New York Stock Exchange, at $8.72. Deutsche Telekom, which also declined to comment, saw its shares fall 1.5 percent to 11.61 euros.

NEXTEL WOES

Sprint's market value has fallen 66 percent since it bought Nextel Communications for $35 billion in 2005.

Its main problem has been subscriber losses amid customer service and network problems. Nextel's iDen network is incompatible with Sprint's CDMA network. Deutsche Telekom's T-Mobile USA uses yet another mobile technology known as GSM.

Sprint spokeswoman Leigh Horner declined to comment on the reports, but said the company was committed to maintaining the iDen network, saying "it represents a key differentiator."

Chief Executive Dan Hesse told Reuters in early April he was not actively looking for a buyer for the Nextel assets but would evaluate any offers.