Sprint rejects $5 billion investment offer: source

By Michael Flaherty and Sinead Carew

NEW YORK (Reuters) - Sprint Nextel Corp (S.N: Quote, Profile, Research, Stock Buzz) has rejected a $5 billion investment by a group including former chairman Tim Donahue, South Korea's SK Telecom Co Ltd (017670.KS: Quote, Profile, Research, Stock Buzz) and Providence Equity Partners, a source familiar with the matter said on Thursday.

The offer, submitted before the U.S. Thanksgiving holiday last Thursday, was in the form of convertible-preferred securities that could be converted into equity for 20 percent more than Sprint's current stock price, said the source, who did not want to be identified. The source said the offer was not meant to be hostile.

A spokesman for SK Telecom, South Korea's top mobile operator with a 52 percent market share, confirmed on Friday it approached Sprint in mid-November with several cooperation options but hadn't heard back from the U.S. company.

Sprint, whose market value is around $43 billion, declined to comment, while Donahue and Providence could not immediately be reached.

SK Telecom is seeking to expand in the United States and said earlier this month it was boosting its investment in Helio, a high-end wireless venture with EarthLink Inc (ELNK.O: Quote, Profile, Research, Stock Buzz) that rents space on Sprint's network.

Sprint, the No. 3 U.S. mobile service, has lost market share to rivals such as AT&T Inc (T.N: Quote, Profile, Research, Stock Buzz) and Verizon Wireless, and is looking for a new chief executive to replace Gary Forsee who stepped down last month.

The Wall Street Journal earlier reported on its Web site that the investor group had also sought to install Donahue as

CEO.