Sprint gains on takeover reports

Sprint Nextel Corp, the third-biggest US mobile-phone carrier, rose as much as 13 percent in German trading on reports Deutsche Telekom AG is analyzing a possible takeover offer.

A combination could make the German company's T-Mobile USA unit the biggest wireless company in the United States, the Wall Street Journal said. Sprint's share price drop and the strong euro make the transaction a bargain, Der Spiegel reported over the weekend, without saying how it got the information.

Interest in Sprint, with a market value of more than $22 billion, may shore up the stock after a 40 percent slump this year. Overland Park, Kansas-based Sprint posted a $29.6 billion loss in 2007 as customers moved to larger rivals AT&T Inc and Verizon Wireless. Last week, Sprint had its credit rating cut to junk by Standard & Poor's.

"Deutsche Telekom would come under fire from the rating agencies if it made such an acquisition," said Frank Schneider, an analyst at alpha Wertpapierhandel in Frankfurt. "Big takeovers are always seen with criticism and Sprint hasn't been doing well recently."

Deutsche Telekom spokesman Andreas Leigers and Sprint spokesman James Fisher both declined to comment on "rumors".

Sprint rose as much as $1.05 to the equivalent of $8.94 in Germany from the close of $7.89 in New York Stock Exchange composite trading on May 2. The stock traded at $8.68 as of 9:50 am Frankfurt time. Deutsche Telekom declined as much as 21 cents, or 1.8 percent, to 11.58 euros and traded at 11.70 euros at 10:52 am local time.

Hesse's work

Sprint is valued at less than $1,000 per customer based on a study of takeover scenarios by Merrill Lynch & Co published in March, Der Spiegel said. Sprint has about 54 million customers and generates about $40 billion in sales, the magazine said.

Deutsche Telekom may decide not to pursue a deal, and any bid could be weeks or months away, the Wall Street Journal said, citing unidentified people familiar with the matter.

Sprint may report a net loss of $416.6 million in the first three months of the year, the average estimate in a Bloomberg survey of analysts. Declining earnings may trigger debt provisions allowing creditors to demand early repayment.

The carrier's corporate credit and senior unsecured debt ratings were lowered two levels to BB from BBB- because of its deteriorating operating performance, S&P said last week.

Standard & Poor's put its long-term rating for Deutsche Telekom on review on March 17, indicating a possible downgrade.

Agencies

(China Daily 05/06/2008 page17)