Officially, neither company was confirming or denying the story, which was reported Thursday in
The Wall Street Journal
. But investors rushed to embrace the concept, which would pair consumer-oriented Sprint with business favorite Nextel.
Nextel rose 7% and Sprint 8% in heavy trading on a day when other big telcos dropped fractionally.
The companies bear similar market values in the $30 billion range, and combining the two would create a stronger player in the consolidating wireless field. But observers note that merger talks are hardly rare in the telecom field, where big-name discussions such as the
talks earlier this year have gone for naught.
"A lot of this could simply be wishful thinking," says independent telecom consultant Marty Hyman, who had no knowledge of any discussions.
Hyman, who has consulted with all the major telcos, agrees there would be a compelling logic behind this deal. Now that the wireless market is dominated by two giants --
-- the rest of the field has a need for "fewer players and more scale," Hyman says.
In addition to its solid wireless side, Sprint has a fading long distance business and a small local phone operation. It ranks a distant third in the business services market behind AT&T and
. Sprint's future and more than half of its sales come from its national wireless operation. Analysts say adding Nextel would bolster its wireless prospects.
Nextel has had a tremendous run, quickly growing its walkie-talkie niche market service to a profit-leader and much admired stock. But Nextel faces an expensive decision on network upgrades that have loomed over the company. The Reston, Va., telco soon will have to shell out a few billion dollars if it hopes to keep up with its peers on so-called 3G upgrade to fast wireless Internet services.
"Nextel is at a high-water mark and looking for a way to move forward," says Hyman. "A deal like this would give both companies an effective way to manage capital spending on 3G."
But as Hyman points out, nearly all these players have been down this path to some degree.
"There have been a lot of these discussions," says Hyman, "but very few have gotten done."