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Updated from Aug. 16


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

merger celebration is turning into big pep rally for the company's affiliates.

Fresh off last week's acquisition of Nextel, Sprint is preparing to acquire its largest affiliate,

Nextel Partners

( NXTP), in the next few weeks, according to people familiar with the situation. Sprint owns almost a third of the wireless service provider. Though talks are still under way, people familiar with the company say the deal could fetch about $30 a share, or $7 billion.

Sprint's CFO Paul Saleh downplayed that scenario in an interview Tuesday, saying there is "a lot of misinformation" surrounding Nextel Partners' so-called put option. That agreement requires Sprint to buy out the company if Nextel Partners shareholders vote for the move. Saleh says the process could involve three appraisers and take four months or more if challenged. But others say a separate negotiation is under way to bring the deal to a quick resolution.

Early Wednesday, shares of Nextel Partners were up 89 cents, or 3.4%, to $27 on Instinet. Sprint Nextel closed Tuesday at $25.86.

Even beyond Nextel Partners, however, Sprint faces a bigger task: how to resolve contractual issues with its nine other regional affiliates.

Some of the affiliates have charged that the Sprint-Nextel combination violates noncompete agreements by creating an entity rivaling the small telcos in some markets. If Sprint decided to acquire its remaining affiliates not including Nextel Partners, it could face an additional $12 billion tab, say analysts.

Other options include dragging the matter into the courts or rewriting the affiliate programs. But some observers say a buyout of the affiliates makes more sense, even with the hefty price tab.

"Sprint needs to get this done," says one Wall Street analyst. "They should eat crow now and walk away free from further problems."

Shares of some of Sprint's affiliates have soared as takeout speculation gains favor on Wall Street. For 2005, Nextel Partners is up 34%,


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( UPCS) is up 23% and


( APCS) is up 37%.

Last month, Sprint settled one dispute by offering $1.3 billion to buy Lake Charles, La., affiliate

U.S. Unwired


. Earlier this month, Alamosa sued to stop the big merger, saying Sprint's takeover of Nextel would damage exclusivity covenants.

Two affiliates,


and UbiquiTel, are under a forbearance agreement to postpone legal action until January.

"Obviously, a deal with Nextel Partners would accelerate the whole process," says the unnamed analyst.

But don't expect a one-size-fits-all solution.

"Separately, each case will have to be evaluated," says Sprint's Saleh, referring to how the company will attempt to resolve matters with its affiliates.

Clearly, Sprint isn't happy with the higher valuations investors have been putting on the affiliates and would be much happier paying less. But some industry watchers say times have changed and if the company wants to be regarded as the best wireless pure play, it may have to ante up.

The affiliate program was a smart way to build a national brand and avoid taking on all the capital investments required to construct a new network, say industry observers. But at this point, says the unnamed analyst, "it would make the most sense if they rolled them all up."