Sprint Nextel may be a takeover target, according to one of the nation’s largest investment banking firms.
Deutsche Telekom, owner of T-Mobile and the world’s sixth largest phone company, may consider acquiring Overland Park-based Sprint to block a price war in the mobile phone industry, analysts for Merrill Lynch speculated in a report Thursday.
Merrill Lynch, which advises its clients to sell Sprint shares, said it is not aware of any acquisition discussions.
Sprint, as a matter of policy, doesn’t comment on market rumors and speculation.
Merrill Lynch said Sprint’s operational problems and shaky position in the U.S. wireless industry may force the company to cut prices even further to attract customers.
“In such a price war scenario, we think T-Mobile would face the most pressure, and Deutsche Telekom would see the increased urgency to drive market repair,” according to the Merrill Lynch report.
T-Mobile generally is considered to be the low-cost alternative among the top five U.S. mobile phone companies. Last week, Sprint introduced an unlimited voice and data wireless plan that undercut other U.S. companies.
A Deutsche acquisition is possible now because of Sprint’s depressed share price, according to Merrill Lynch. The plunging value of the U.S. dollar also makes a potential acquisition by a foreign buyer cheaper than it otherwise would be.
Investors on Wall Street didn’t put much stock in Merrill Lynch’s speculation. Sprint shares closed Thursday at $6.80, down 20 cents. Shares of the company have fallen more than 48 percent since the beginning of the year.
Sprint reported last week that it lost $29.5 billion, or $10.36 a share, on sales of $9.8 billion during fourth-quarter 2007. Sprint also suspended dividends for investors and said it expected the first-quarter loss of an additional 1.2 million subscribers.