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Salvation for Sprint Nextel?

A published report says Deutsche Telekom might be close to bidding for the wireless carrier. Should it happen, T-Mobile would grab the No. 1 wireless position in the U.S.

Updated from 8:57 a.m. EDT

Shares of

Sprint Nextel

(S) - Get SentinelOne, Inc. Class A Report

surged Monday on a report that

Deutsche Telekom

(DT) - Get Dynatrace, Inc. Report

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.

Cramer: How to Buy Telecom

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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) - Get AT&T Inc. Report

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was losing 1%, and

Verizon

(VZ) - Get Verizon Communications Inc. Report

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."

Sprint has struggled with high customer attrition, which the company has blamed on poor customer service. During its fourth-quarter earnings report, Sprint said that the number of wireless subscribers dropped by 108,000 in the quarter due to declines in post-paid iDEN users and prepaid Boost mobile users. Total post-paid subscribers, a favorite metric among analysts, declined by 683,000.

"We are taking the customer defection issue very seriously, and we're addressing it," said Sprint CEO Dan Hesse during the company's fourth-quarter conference call. "Because we have not provided the right experience, customers are leaving us."

Sprint will deliver first-quarter results on May 12, with analysts expecting a profit of 2 cents a share on revenue of $9.40 billion, according to Thomson Reuters. However, net subscriber adds (or declines) will undoubtedly receive more attention from analysts and Deutsche Telekom.

The possibility of a buyout also brings up questions over Sprint's long-rumored merger of its WiMax division with

Clearwire

(CLWR)

. In March, Clearwire said it has been active in talks to hammer out an agreement with Sprint for a deal that would create a new company that combines Sprint's licenses in the 2.5-gigahertz wireless spectrum and Clearwire's spectrum in the same and adjoining air waves.

The following month, Sprint said the commercial launch of the high-speed WiMax network had been postponed, leading to questions about the company's ability to fund the technology. However,

Comcast

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and

Time Warner

(TWX)

were said to be considering offering their backing.

Intel

(INTC) - Get Intel Corporation Report

has indicated it's interested, and

Google

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is believed to be thinking about participating in the project.