Sprint Nextel Stock Rises 10.5% On Talk of Shake-Up, Takeover

Shares of Sprint Nextel rose yesterday along with renewed speculation that a major shake-up of the troubled wireless carrier is in the works.

The company's shares climbed 10.5 percent, or 83 cents, to $8.72, after reports that it was being considered for a takeover by German telecommunications giant Deutsche Telekom or that it might spin off its Nextel business into a public safety wireless network.

Sprint spokeswoman Leigh Horner declined to comment on the reports, saying, "We do not comment on rumors and speculation."

The stock movement underscored the desire of shareholders for sweeping changes at the wireless provider, which has been quiet about its plans under its new chief executive, Dan Hesse, according to analysts. Sprint has lost about 1.2 million subscribers since its $35 billion acquisition of Nextel in 2005. Hesse was appointed in December to rescue the company, which has suffered from complaints about its customer service and network.

"It's clear they need to do something big," said Rebecca Arbogast, an analyst at Stifel Nicolaus, "and we've known that they would have to really go back to the drawing board and see what direction they are going to go."

With a depressed stock price and the U.S. dollar falling in value in relation to the euro and other currencies, the company's various businesses -- including its future high-speed WiMax service and Nextel's walkie-talkie-like service -- are obvious takeover targets, said Patrick Comack, an analyst at Zachary Investment Research.

"There are a lot of businesses that see Sprint as attractive on a breakup basis, and they are probably getting lots of offers right now," Comack said. "Things are very fluid at the moment."

Since Hesse's appointment, the company has been the subject of widespread speculation -- none of which has been realized. According to rumors over the past year, the company would be merged with cable operators or purchased by a South Korean telecommunications provider. Then on Sunday, the Wall Street Journal, citing unnamed sources, reported that Sprint would be bought by Deutsche Telekom.

Yesterday, the newspaper, quoting "people familiar with the matter," reported that Sprint was apparently considering the sale of Nextel to a consortium of investors, organized by Nextel co-founder Morgan O'Brien. The consortium would use Nextel's network as a nationwide wireless network for public safety workers, according to the report.

A Sprint official who spoke on the condition of anonymity played down the report, pointing to a recent marketing campaign that showed Sprint's investment in expanding its Nextel service.

"We have been working on marketing around this and expanding the portfolio of Nextel direct connect. None of that is changing," the official said.

O'Brien has been scrutinized by Congress and members of the Federal Communications Commission over his role in the failed auction of a federal radio spectrum for emergency first responders. O'Brien, the head of Cyren Call, is the business adviser to public safety officials who hold the licenses to that spectrum, called the 700 MHz D block.

Cyren Call responded to the report about Nextel by saying that it "is actively engaged in developing one or more qualified consortia to bid for the 700 MHz D Block. All conversations in support of that objective are treated as confidential." The company did not comment beyond its prepared statement.

Deutsche Telekom, which owns the fourth-largest U.S. wireless carrier, T-Mobile, has been rumored for months to be considering an acquisition of Sprint as part of a more aggressive push into future high-speed wireless services known as 4G. A merger would result in the largest wireless carrier in the nation, with more than 74 million subscribers.

Although the U.S. dollar's depreciation against the euro might make Sprint a bargain, several analysts noted that there would be large hurdles to a merger, including resistance from Sprint shareholders, who would be unwilling to sell at a low price and would push for Hesse to be given more time to revive the company, according to analyst Philip Cusick at Bear Stearns.

Cusick also noted that the networks of the two companies operate on different technologies, which could not be easily integrated within at least three years.