Shares of SprintNextel climbed 7.6 percent early Tuesday morning on the Big Board following reports Deutsche Telekom, the parent of T-Mobile USA, is looking into acquiring the third-largest mobile operator in the United States.
The combination of T-Mobile, the fourth largest mobile operator in the United States, and Sprint would make it the biggest in the nation. For its part Deutsche Telekom dropped 1.3 percent, or 24 cents, to 17.87 U.S. dollars.
"Sprint is a beaten-down asset and Deutsche Telekom wouldn't be doing their job if they weren't looking at it," said Steve Clement, an analyst at Pacific Crest Securities. Clement said he didn't know if they were in formal negotiations, but a combination of the two companies would be messy.
"You already have an asset in Sprint that's still dealing with a tough merger of a few years ago, and Deutsche Telecom's operation uses different technology than Sprint," Clement said. T-Mobile uses so-called GSM technology, while Sprint uses CDMA.
The German magazine Der Spiegel was the first to report Deutsche Telecom's interest over the weekend, saying that it was looking at different approaches, whether an outright takeover, or a merger, in an effort to expand its stake in the U.S. market.
To date, Sprint's shares have fallen 59.4 percent during the past 12 months, and along with the euro's strength against the dollar, the deal would be relatively cheap.
Sprint's shares have fallen because it hasn't been able to get its act together as poor service, wishy-washy marketing and a troubled integration of the Nextel business have caused Sprint to fall far behind AT&T and Verizon Wireless in getting new customers and holding onto to those it has.
Der Spiegel's report was followed by one published by the Wall Street Journal on Monday, which said "people familiar with the matter" had told it of Deutsche Telekom's cautious interest. Thomson Financial also published a report -- which cited "industry sources" -- that the German telecom company held preliminary talks with Sprint. It noted that whether or not a bid would be made is completely open.
Source:Xinhua/Agencies
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