Salvation for Sprint Nextel?

Updated from 8:57 a.m. EDT

Shares of Sprint Nextel (S) surged Monday on a report that Deutsche Telekom (DT) was close to bidding for the flagging wireless carrier.

The Wall Street Journal reported that a bid for Sprint from Deutsche Telekom was at a preliminary stage and management could walk away before making an offer, according to people close to the deal.

Currently, Deutsche Telekom's T-Mobile unit is the fourth-largest wireless carrier in the U.S., with roughly 28.7 million customers. If Deutsche Telekom were to acquire Sprint, which has a market capitalization of $22 billion and had 53.8 million total subscribers at the end of 2007, it would propel T-Mobile to the top wireless position in the U.S.

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A Sprint representative said it was company policy not to comment on rumors or speculation. Deutsche Telekom did not return requests for comment.

Sprint was lately up 50 cents, or 6.3%, to $8.39, while Deutsche Telekom was off 1.6% at $17.82. Rival AT&T (T) was losing 1%, and Verizon (VZ) was down 1.5%.

Rumors of a Sprint buyout first surfaced in March after a CNBC contributor said Sprint hired Morgan Stanley to explore potential deals and takeovers, although both Sprint and Morgan Stanley declined to comment at the time.

Of Sprint's three U.S. rivals, analysts have considered a partnership with T-Mobile the strongest possibility, despite the difficulties that would arise from the merging of three different wireless technologies.

"T-Mobile uses a different technology, in GSM, than what Sprint uses, which is CDMA and iDEN," Credit Suisse analyst Chris Larsen said to TheStreet.com back in March. "That would leave a company with three different technologies for its network."