Sprint, Nextel seen near deal, consolidating wireless industry11 December 2004
Sprint and Nextel reached tentative agreement on a merger of the two wireless telecom groups in a deal worth an estimated 34.8 billion dollars, reports said.
The Wall Street Journal and CNBC television said the deal would be structured with Sprint offering 1.3 shares plus a small amount of cash for Nextel.
The deal, which had not was been finalized, was being described as a merger of equals that would create the third largest US cellular carrier with nearly 39 million subscribers.
The Journal said Nextel shareholders would get the equivalent of 1.3 shares of Sprint stock, with a small cash element in order to ensure that current Sprint shareholders have more than 50 percent of the combined company.
The combined company would then spin off Sprint's local-phone carrier, the Journal said.
Current Sprint chief executive Gary Forsee would serve in that role at the new, largely wireless company, which would be called Sprint-Nextel, the reports said.
Nextel chief executive Timothy Donahue would serve as executive chairman of the new company.
The company would have a 50-50 split among board members and be headquartered in Reston, Virginia, where Nextel is currently based, with an operating headquarters in Overland Park, Kansas, where Sprint is currently based.
Nextel is known for introducing a popular walkie-talkie feature on its mobile phones, and has some 15.3 million customers.
Sprint, a diversified telecom group, has some 26 million customers in over 100 countries.
Neither company offered any comment but Wall Street was abuzz with merger speculation.
Sprint shares fell 14 cents to 24.14 and Nextel slipped five cents to 29.76 in closing trade.
Saying that combining the two management teams would be "like trying to mix oil and water," analysts with Goldman Sachs said in a research note that the deal would be tough for one side in particular to negotiate.
Nextel would have more to gain than Sprint -- because Nextel would avoid having to build out a new data network and would have instant access to a broader market -- which would likely put Sprint in a better bargaining position, the analysts said.
"This is our source of skepticism that such a deal can get done in the near term," they wrote.
Calling the potential merger "a constructive step forward for the wireless industry," Smith Barney analysts wrote in a research note that Sprint would benefit from a bigger network, Nextel's business channels, and the potential for creating enough stand-alone wireless capacity to sell or spin off Sprint's local assets.
"In our view, we think a combination between (Nextel) and (Sprint) has merit," the analysts wrote.
"It could work well," said Arthur Kurtze, a former Sprint PCS chief operating officer. But, he added, "it's not one of those things where there are obvious benefits to combining these two forces like it was with AT and T Wireless and Cingular."
Cingular's 41 billion dollar purchase of AT and T Wireless was just completed. The other key players in the industry are Verizon Wireless (in which Britain's Vodafone holds a major stake) and T-Mobile, a unit of Deutsche Telekom.
Like Verizon, Sprint uses CDMA (news - web sites) technology developed by Qualcomm Inc. A merger with Sprint would likely determine Nextel's choice for a technology to provide higher-speed data services. Nextel has been looking at CDMA and another technology.
Source: AFP via Yahoo
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