Sprint stock up on sale rumors

NEW YORK (Reuters) - Shares of Sprint Nextel Corp (S.N) rose over 3.5 percent on Friday as investors reacted to market speculation the No. 3 U.S. mobile service could be sold to Britain's BT Group (BT.L), but analysts were skeptical.

Buyout rumors about Sprint have recently abounded as some investors bet its share price, depressed due to market share losses, could make it a sale prospect.

The latest rumor involved BT and pushed Sprint's shares up 64 cents to $18.65 and boosted option prices, analysts said. A representative for BT declined comment.

Paul Foster, options strategist at Web information site theflyonthewall.com, said October calls and share prices were up on "unconfirmed chatter" about interest from BT. But Foster also said he was "skeptical" about the talk.

Equities analysts also played down the possibility.

"There's renewed merger and acquisition speculation ... I don't think there's anything to it," said Stanford Group analyst Michael Nelson who noted that the timing of the rumors could relate to the expiration dates of Sprint options.

Chris King of Stifel Nicolaus said that if a deal was imminent, Sprint Chief Executive Gary Forsee would likely have canceled investor meetings he held in New York this week.

Sprint's shares have lost almost third of their value since April last year as the company's customer growth rates have disappointed investors.

Korea's SK Telecom (017670.KS) recently denied speculation it was considering a bid for Sprint. Other rumors have centered around private equity buyers.

Nelson said a private equity investment would be unlikely given current turmoil in credit markets.

Options offering the right to buy Sprint at $19 a share by October 19 traded 6,655 contracts on Friday afternoon up from less than 350 the day before and the option price rose to 65 cents a contract from 35 cents.

Meanwhile 15,000 of its October 20 calls changed hands up from 131 the day before with the price rising to 35 cents from 15 cents the day before.