GO
Loading...

Enter multiple symbols separated by commas

Sprint Shares Surge After Report of SK Telecom's Interest

Shares in Sprint Nextel surged as much as 16% in afterhours trade after a media report South Korea's SK Telecom was preparing to bid for the No. 3 U.S. wireless company. Shares in South Korea's top mobile phone operator also jumped as much as 4% early on Tuesday following the report.

SK Telecom denied the article by Korea Economic Daily, while bankers and analysts had mixed views on the prospect. Most ruled out a full takeover by SK Telecom, whose market capitalization is less than a third of Sprint Nextel, but said a limited investment by SK Telecom
was possible.

"The investment size is likely to come to less than 1 trillion won for some shares in the company, considering the huge market value of Sprint," said Yoo sang-rok, a telecoms analyst at Daewoo Securities.

The Korea Economic Daily cited brokerage sources as saying SK Telecom had been contacting several private equity funds during the first half of 2007 about a joint bid for Sprint Nextel.

SK Telecom is seeking growth outside its home market where four out of every five people have a mobile phone. It runs a wireless joint venture with EarthLink in the United States and made a $1 billion investment in China Unicom's bonds last year, which gave it an option on a nearly 7% stake in China's No. 2 mobile firm.

However, its U.S. business has yet to turn around and SK Telecom said last week it and EarthLink were to inject additional funds of up to $100 million each in Helio, which rents network space from Sprint.

An SK Telecom executive said the report was "groundless" and the firm was not considering a hostile takeover of Sprint Nextel.

Cindy Kang, an SK spokeswoman, told CNBC the company would later file an official denial with the local stock exchange. "No, it is not TRUE at all, and we will disclose formal denial today," Kang said.

Sprint Nextel declined to comment. Sprint Nextel is valued at about $62 billion on the New York Stock Exchange, while SK Telecom's market capitalization is around $18 billion.

"A bid for Sprint will be too much of a burden for SK Telecom to bear," said Kim Kyung-mo, an analyst at Mirae Asset Securities. "One trillion won in investment will be a big deal in emerging markets but nothing in the developed market."

Others said an investment deal looked feasible given SK Telecom's push for growth overseas. "A partial investment looks very likely as SK Telecom has been trying in vain to boost its business in the United States, said an M&A banker in Seoul. "It won't be difficult for SK Telecom to find financial partners, although given Sprint Nextel's big market cap, the amount of stakes could be limited," the banker added.

In the Asian morning session Tuesday, SK Telecom shares were up 3.97% to trade at 209,500 won.

Shares in Sprint Nextel were last quoted at $22.42, up about 4.4% from the market close. They earlier surged to $24.95.

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    Please choose a subscription

    Please enter a valid email address
    To learn more about how we use your information,
    please read our Privacy Policy.

Don't Miss

U.S. Video

  • Ex-Lehman CEO Dick Fuld delivers keynote

    Former Lehman Brothers CEO Dick Fuld delivers the keynote at the Marcum MicroCap Conference, addressing the "building block years" at Lehman, and the "perfect storm" that led to the crisis. It is the first time Fuld is speaking publicly since 2008.

  • Fuld breaks his silence

    Former Lehman CEO Dick Fuld will deliver the keynote at the Marcum MicroCap Conference. Larry McDonald, Societe Generale, and CNBC's Andrew Ross Sorkin, share what they'd like to hear from Fuld.

  • Retailers report mixed results

    Tiffany and Michael Kors reported very different results. Tiffany beat, while Michael Kors reported its slowest sales growth since it started trading.