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: Quote, Profile, Research, Stock Buzz) to Deutsche Telekom AG (DTEGn.DE: Quote, Profile, Research, Stock Buzz) 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: Quote, Profile, Research, Stock Buzz) with $3 billion funding from cable companies, Intel Corp (INTC.O: Quote, Profile, Research, Stock Buzz) and Google Inc (GOOG.O: Quote, Profile, Research, Stock Buzz), a source familiar with the matter told Reuters.