Sprint up after report of SK Telecom's interest

SEOUL/NEW YORK (Reuters) - Shares in Sprint Nextel Corp. (S.N) surged in Monday U.S. after-hours trade following a report that South Korea's top telecoms operator, SK Telecom Co., was preparing to bid for the No. 3 U.S. wireless firm.

South Korea's top mobile operator (017670.KS) delivered an official denial of the report on Tuesday afternoon during market hours, but its shares closed 4.22 percent higher as investors bet that the reported deal could be feasible.

"The talk that our company is seeking to buy a U.S. mobile company is untrue," SK said in a filing with the Korea Exchange, without elaborating. A spokesman stressed that SK had no current plans at all for tie-ups or share investment in Sprint.

Sprint Nextel declined to comment.

Bankers and analysts ruled out a full takeover by SK Telecom, whose $18 billion market value is less than a third of Sprint Nextel's $62 billion.

Sprint shares settled more than 4 percent higher in after-hours trading in New York after briefly rising more than 14 percent following the close on Wall Street. Shares in SK Telecom (017670.KS) jumped nearly 5 percent in Seoul early on Tuesday.

Analysts said SK may be eyeing a small stake in the U.S. carrier.

"The investment size is likely to come to less than 1 trillion won ($1.1 billion) for some shares in the company, considering the huge market value of Sprint," said Yoo sang-rok, a telecoms analyst at Daewoo Securities.

The Korea Economic Daily cited brokerage sources as saying SK Telecom had been contacting several private equity funds during the first half of 2007 about a joint bid for Sprint Nextel.

SK Telecom is seeking growth outside its home market, where four out of every five people have a mobile phone. It runs a wireless joint venture with EarthLink Inc. (ELNK.O) in the United States and made a $1 billion investment in China Unicom Ltd.'s (0762.HK) (CHU.N) bonds last year, which gave it an option on a nearly 7 percent stake in China's No. 2 mobile firm.

However, its U.S. business has yet to turn around and SK Telecom said last week it and EarthLink were to inject additional funds of up to $100 million each in Helio, which rents network space from Sprint.

TAKEOVER TARGET

The U.S. carrier has been the target of takeover speculation since May after smaller rival Alltel Corp AT.N agreed to a $25 billion buyout, although several industry experts said they doubted private equity buyers would have the appetite for a company whose market value is about $62 billion.

"A bid for Sprint would be too much of a burden for SK Telecom to bear," said Kim Kyung-mo, an analyst at Mirae Asset Securities. "One trillion won in investment would be a big deal in emerging markets but nothing in the developed market."

Others said a minority investment in Sprint Nextel looked possible given SK Telecom's push for growth overseas.

"A partial investment looks very likely as SK Telecom has been trying in vain to boost its business in the United States," said an M&A banker in Seoul, who declined to be identified.

"It won't be difficult for SK Telecom to find financial partners, although given Sprint Nextel's big market cap, the stake size could be limited," the banker added.

SK Telecom shares closed at 210,000 won, outperforming the benchmark index which rose 0.58 percent.

Shares in Sprint Nextel were last quoted at $22.42, up about 4.4 percent from the market close in after hours trade.

(Additional reporting by Kim Yeon-hee)