Shares of Sprint Nextel Corp. (NYSE: S) are rising on a Wall Street Journal (subscription required) report that Deutsche Telekom AG (NYSE: DT) is poised to make a bid for the wireless telecommunication company. If the report is accurate, Sprint's long suffering shareholders should do as the Steve Miller Band song suggests "take the money and run" because the deal may not happen.For Sprint, though, this may be its only hope. Sprint shares have slumped almost 40% this year as the Overland Park Kansas-based company tried in vain to gain marketshare against larger rivals including Verizon and AT&T Inc. (NYSE: T). The commercials starring the company's affable CEO Daniel Hesse haven't helped much either. Remember when Hesse was named CEO last December, board member Irvine O. Hockaday Jr. remarked that Hesse "has the board's full support to take decisive actions necessary to improve our performance."
Does that mean a sale to the former German telecom monopoly? The deal makes sense in theory because combining Sprint and Deutsche Telekom would create the top wireless company with more than 82 million customers. Verizon, which is a joint venture between Verizon Communications Inc. (NYSE: VZ) and Vodafone Group Plc. (NYSE: VOD) has 67.2 million customers while AT&T has about 71 million wireless subscribers.
But as Bloomberg News points out, analysts argue that integrating the Deutsche Telekom and Sprint Nextel networks wouldn't be easy. Moreover, the U.S. Department of Homeland Security may not look kindly on a foreign company taking over a U.S. telecom provider for national security reasons, the news service notes.
Even so, the arguments for the merger are so compelling that it might be worth the risk.
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Reader Comments (Page 1 of 1)
5-05-2008 @ 1:45PM
Jason said...
A better question to ask in this situation is: Why? Besides the subscriber base, what does Sprint-Nextel have that DT can't get through "organic" growth? DT will be testing a new 3G network (all be-it in NYC). They're innovative hardware selection keeps them competitive with the big dogs. A sexy story and brand, (Katherine Zeta-Jones always in my dreams…) "Get more." What would they have other than "Get More" subscribers? Sprint has issues. Sliding credit ratings, bleeding of contracts to competitors, and an inability to present new competitive hardware/technology just to name a few. Don't hold your breath for that new iPhone, Sprint subscribers... Sprint's failure to execute a WiMax network in the next year could be the "coup de gras." But wait there’s more! Sprint has now come under legal fire as workers are accusing the board of infusing cash from employee pension plans into a failing investment (let me give you a hint it begins with an “S”). Why would DT quoting Hamlet, “take arms against a sea of troubles and by opposing end them. To die.” In an effort to “get more” market share it seems an acquisition would present *ahem* quoting Notorious B.I.G. “Mo’ Money, Mo’ Problems.”