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Sprint: From Bankruptcy to Buyout

Stocks in this article: S T PCS LEAP DISH

NEW YORK ( TheStreet) - After missing out on the sweepstakes for pre-paid telecom carrier MetroPCS (PCS), speculation centered on whether Sprint Nextel (S) would jump in with a counter bid or be left without a partner to tap the surge in data loads from Apple (AAPL) and Google (GOOG)-operated smartphones. Now, strong indications that Japan's Softbank may buy Sprint outright signal the industry's third carrier may not enter the telecom sweepstakes at all.

It's not the first time speculation on Sprint's fate has been misguided, and Thursday's reports of a possible takeout valued at nearly $13 billion signal investors may yet want to bury their head in the sand and focus on the company's standalone prospects.

Such a perspective might clear the air on Sprint's true worth, while helping investors make their way through expected tectonic shifts in the wireless market by year-end.

Earlier in the year, when Sprint's shares were near 2012 lows, some analysts and investors questioned whether the company would fall to bankruptcy. A subsequent doubling in the company's stock in the past six months on operating performance improvements and readily available financing has put a lid on harbingers of doom. Then, amid rampant M&A speculation, investors began handicapping Sprint's chances at buying also-ran carriers like MetroPCS and Leap Wireless (LEAP), which have millions of subscribers, or DISH Network (DISH), which holds valuable wireless assets.

Instead, Sprint now looks to be a takeout target - a premise few considered possible after the U.S. Department of Justice blocked consolidation efforts by industry-leading carriers like AT&T (T).

With signals now indicating Sprint won't be a victim of bankruptcy or an acquirer, investors may be wise to simply focus on whether they'd invest in the company's forecast operating performance and its plans to compete in the ultra competitive wireless market.

As Sprint plows billions into a 4G wireless plan and a rollout of unlimited data use Apple iPhone contracts, the company's remained on track to go from worst to first as a stock performer in the fast-moving sector.

Organic stock gains, driven by operating margin improvements and a forecast turn to profitability in coming years, may yet be more attractive than a takeout at a modest premium to market prices and M&A efforts that may dilute shareholders. Sprint shares generally stumble when the company is mentioned as an acquirer.

The biggest question for investors should be whether the company's forecast execution of its 4G wireless rollout - called Network Vision - and its unlimited iPhone data plan, is a winning formula, over any takeout offer. That's especially the case given the reported underwhelming terms of Softbank's play for Sprint.

On reports of the Softbank deal, Sprint shares are up over 11% in afternoon trading to $5.61, adding to 2012 stock gains in excess of over 100%.

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