Sprint Corp. and Nextel Communications Inc. announced this morning that they will merge the companies in a deal that will create a new wireless telecommunications giant.
Sprint Nextel, as the new company will be called, will have a combined total of more than 35 million subscribers and, as of this morning, a combined market value of roughly $70 billion.
Under the deal, each company is being valued equally, at $35 billion. Nextel shareholders will receive 1.28 shares of Sprint plus a small amount of cash per share, estimated at 50 cents today.
The agreement has been approved by the boards of directors but must also be approved by stockholders and regulatory authorities. In the meantime, markets have been following a flurry of speculation that Verizon Communications Inc., the nation's largest phone company and the second largest wireless company, could make its own last-minute bid for Sprint.
Under the merger announced today in New York City, Sprint chief executive Gary D. Forsee will take the top post as chief executive of the combined company and will move to the corporate headquarters, which will be in Reston. Nextel chief executive Timothy M. Donahue will be executive chairman.
Nextel executives also will fill some key positions, including chief financial officer, chief technology officer and chief of strategic planning. The merged company will have an operational headquarters in Overland Park, Kan., where Sprint is based.
About 2,500 of Nextel's 18,000 employees work in the Washington area.
Forsee, in a statement, said the merger "positions Sprint Nextel for greater success than either company could have achieved alone," combining Nextel's advanced profitability with Sprint's advanced wireless technology.
A statement this morning estimated that the merger would save about $12 billion as the two companies consolidate operations.
The combined Sprint Nextel will be the third-largest wireless firm, behind Cingular Wireless LLC and Verizon Wireless. Cingular, which acquired AT&T Wireless Services Inc. seven weeks ago, has about 47 million subscribers; Verizon Wireless has 42 million. The merged company is expected to spin off Sprint's local phone holdings in a transaction analysts said could bring in as much as $19 billion.