UPDATE 3-Sprint weighs rival bid for MetroPCS -sources

* Sprint may wait until after T-Mobile/MetroPCS deal -source

* Sprint came close to buying MetroPCS in February -sources

* Sprint shares down 2.1 pct, MetroPCS shares up 3.7 pct

(Adds analyst comment on T-Mobile USA forecasts, updates shares)

By Nadia Damouni and Alexander Hübner

NEW YORK, Oct 4 (Reuters) - Sprint Nextel Corp is considering making a rival bid for MetroPCS Communications Inc , which agreed on Wednesday to a merger with Deutsche Telekom AG's T-Mobile USA, according to people familiar with the situation.

Sprint is deciding whether to go public with a bid for MetroPCS, or to wait until the T-Mobile USA-MetroPCS deal is complete and then bid for the combined company, one of the sources said on Thursday.

Sprint, the No. 3 U.S. wireless carrier, declined to comment. Analysts and bankers have been expecting a fresh round of consolidation in the competitive U.S. wireless industry since AT&T Inc's bid to buy T-Mobile USA collapsed late last year.

The market is dominated by No. 2 U.S. provider AT&T and its bigger rival Verizon Wireless with Sprint and T-Mobile USA trailing far behind in third and fourth place respectively.

Both smaller companies have been losing customers as they have had trouble competing with bigger and even smaller rivals such as MetroPCS and Leap Wireless , which target the market's fastest growing segment - cost conscious customers who pay for calls in advance and don't commit to long term contracts.

In February, Sprint came close to buying MetroPCS, but backed out at the last minute, according to sources familiar with the matter. Sprint's board rejected the $8 billion deal, which would have included debt, just hours before the companies were set to make an announcement, the sources said.

At the time, the board did not want Sprint to spend the money on the deal when the company needed resources for a costly network upgrade, sources said.

Sprint is spending billions of dollars to increase its wireless data speeds to catch up with bigger rivals AT&T and Verizon Wireless and is also shutting down an older network from its disastrous 2005 purchase of Nextel.

The sources on Thursday said a Sprint-MetroPCS combination in February would have generated savings of $8 billion to $9 billion, much greater than the synergies expected from the deal between T-Mobile USA and MetroPCS. The merger partners said on Wednesday that their deal could generate savings of $6 billion to $7 billion on a net present value basis.

Some analysts have said that they are worried that Sprint will be left out of the next round of U.S. market consolidation if it does not make an offer for MetroPCS.

But Pacific Crest analyst Michael Bowen said that while a MetroPCS deal would help Sprint's spectrum position, "it's not a necessary thing."

He estimated that Sprint could pay between $12.50 and $15 per share for MetroPCS by offering its own stock as payment. The T-Mobile offer values MetroPCS at $11.28 per share, according to his calculations.

MetroPCS shares closed 3.7 percent higher on Thursday at $12.69 on the New York Stock Exchange.

When Sprint decided against buying MetroPCS in February, Sprint shares were trading at $2 to $3. They have since risen beyond $5 and closed at $5.09 on Thursday, even after a decline of 2.1 percent for the day.

"They've got a better currency to look at (MetroPCS) now," said Bowen, adding that the break-up fee of $150 million that MetroPCS would have to pay T-Mobile USA if it instead chose Sprint was not too onerous.

Asked about the idea of Sprint waiting to make a bid until the merger of MetroPCS and T-Mobile USA is complete, Bowen said that was a possibility. The merger partners say they expect the deal to be completed in the first half of 2013.

By then, Bowen said, Sprint would have finished the toughest parts of its network upgrade project and would be in better financial shape to handle a big deal.

A key challenge in the MetroPCS/T-Mobile USA deal is their incompatible network technologies.

T-Mobile USA has said it would shut down the MetroPCS network in a process that would take more than two years. In contrast Sprint and MetroPCS use the same CDMA wireless technology standard so they could potentially merge their networks.

Macquarie Research analyst Kevin Smithen said he is skeptical of the "lofty" financial guidance T-Mobile USA and MetroPCS issued on Wednesday when they announced the deal.

"We think it is unlikely that two companies with declining revenues will merge into a company with strong revenue growth of 3-5 percent," Smithen said in a research note referring to the company's five-year compounded annual growth rate target.

Pacific Crest's Bowen said the company's margin target range of 34 percent to 36 percent based on earnings before interest, tax depreciation and amortization is unrealistic.

"Don't believe everything you hear regarding the margins," he said. "You've got to really wait and see where the rubber meets the road."

Bowen also said he would not expect U.S. regulators to oppose a Sprint purchase of a combined T-Mobile USA and MetroPCS.

David Smutny, a veteran of the Justice Department who is now at the law firm Orrick, Herrington & Sutcliffe LLP, thought nothing would stop a deal between either Sprint and MetroPCS or T-Mobile and MetroPCS. However, "if there were a deal between the three of them, it's possible that would be a problem overall."

A merger between Sprint and MetroPCS would likely be approved by the Justice Department's antitrust division and the Federal Communications Commission with minimal or no divestitures, said Stephen Axinn, an antitrust expert with the New York law firm Axinn, Veltrop & Harkrider LLP.

(Reporting by Sinead Carew; Additional reporting by Diane Bartz; Editing by Paritosh Bansal, Lisa Von Ahn, John Wallace and Tim Dobbyn)

((sinead.carew@thomsonreuters.com)(+ 1 646 223 6186)(Reuters Messaging:)(sinead.carew.thomsonreuters.com@reuters.net))