Sprint, SK Telecom: Deal or No Deal?


Sprint Nextel shares, battered over the last few months as the wireless carrier struggled with subscriber losses and management turmoil, got a shot in the arm last week after reports surfaced on CNBC that the company was talking to a South Korean wireless concern about a possible merger.

According to CNBC, SK Telecom, the largest wireless carrier in South Korea with about 22 million customers, was in early talks to acquire Sprint Nextel, sending shares of the latter up by as much as 18% ($1.49 each) on July 15, before closing at $9.04 per share (up 9%, or 78 cents) that day.

But the euphoria about a possible Sprint deal was short-lived. Just minutes after market close on July 15, the Wall Street Journal reported that Sprint and SK were talking mainly about an investment or joint venture, not an outright buy. That actually made more sense given that SK is substantially smaller than Sprint, with a market capitalization of around $15 billion compared with $22 billion for Sprint.

Last fall, Sprint rejected a $5 billion investment offer by SK and Providence Equity Partners, lending further credence to the notion that a full-on acquisition was unlikely.

Sprint shares fell to as low as $8.43 each on July 16 (down 61 cents, or 6.8%) before closing at $8.69 per share, down 35 cents each.