Yet again, there is some buzz that a deal is in the works between Sprint Nextel (S) and Deutsche Telekom's T-Mobile USA. In fact, it may be more than just a rumor. In early trading Tuesday, the shares of Sprint were up nearly 6%.
In light of the need for spectrum investments, Deutsche Telekom has already said it's looking at strategic partnerships. So could this really be code-speak for a merger deal? Perhaps so.
However, it would be tough for Sprint to come up with the financing for a transaction. After all, the company already has a substantial amount of debt -- and also needs to continue with heavy capital investments to remain competitive.
So, if there is a deal, it is likely to involve a big slug with stock. In other words, Deutsche Telekom would be a major shareholder in Sprint.
But such a megadeal can easily fall apart. First of all, there are always questions about valuation. What is T-Mobile USA really worth? It's not an easy question to answer, especially given the company's erosion of its customer base.
Besides, cross-border acquisitions always involve difficult cultural and logistical issues.
Thus, for investors, it's probably a good idea to remain cautious on a deal getting done.