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Sprint Considering Sale or Spinoff of Nextel: WSJ

CNBC.com
Monday, 5 May 2008 | 3:42 PM ET

Sprint Nextelis considering spinning off or selling its Nextel unit, The Wall Street Journal reported on Monday, quoting people familiar with the situation.

Sprint - Together with Nextel
Sprint - Together with Nextel

The report said Cyren Call, a company founded by Nextel founder Morgan O'Brien, is trying to assemble a consortium of investors to acquire Nextel.

Sprint could also choose to spin off Nextel into a separate company, it said, but added that sources said no deal was imminent. Sprint shares launched more than 12 percent higher Monday.

A Sprint spokesperson declined to comment.

Deutsche Telekom Deal?

Earlier Monday, German newspaper Der Spiegel reported that Deutsche Telekom was considering buying Sprint. The paper, which did not cite sources, said a deal is Deutsche Telekom's biggest priority, but that no formal approach has been made.

The possibility of a takeover is attractive because of the strength of the euro against the dollar and Sprint Nextel's relatively low market capitalization of $22 billion, the paper said.

Deutsche Telekom declined to comment.

A deal would combine the No. 3 and No. 4 wireless carriers in the U.S. Deutsche Bank already owns No. 4 player T-Mobile.

Some analysts were skeptical that a merger could go through.

It would be "crazy" for Deutsche Telekom to purse such a deal, one analyst told CNBC Europe.

T-Mobile and Sprint Nextel would not be technologically compatible, T-Mobile margins are still quite healthy as a standalone, and U.S. regulators would likely block the deal, the analyst said.

"It is doubtful that the United States would allow a large part of its mobile phone infrastructure to fall into foreign hands," a trader said. "It is also open whether the German government as largest Telekom shareholder would support the Americanization of the company."

But another analyst told CNBC Europe that a low price could trump any concerns and justify elevated costs for consolidating technologies. The move would also fit into Deutsche Telekom's non-German market share expansion strategy, the analyst said.

- Reuters contributed to this report.

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