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[Phoenix]

PHILADELPHIA/NEW YORK (Reuters) - Sprint Corp. is in advanced negotiations to buy Nextel Communications Inc. for more than $36 billion in a mostly stock deal that would combine the No. 3 and No. 5 U.S. wireless service carriers, sources familiar with the situation said Friday.

Under the terms currently being considered, Sprint aims to pay 1.3 shares of its stock for each share of Nextel. It also would pay a small amount of cash that would give Sprint a slightly larger ownership stake in the company for tax purposes, sources said.

An agreement could be announced early next week, barring any complications, the sources said.

Based on the current stock prices, Sprint's offer would value Nextel's stock at $31.95 a share, plus some cash. The companies declined to comment.

Analysts said a Sprint-Nextel merger would face several hurdles due to the incompatible wireless technologies used in their networks. But the companies still would benefit by gaining more wireless spectrum to transmit calls and a broader customer base.

Nextel currently caters to high-paying corporate customers with its walkie-talkie-type telephones, while Sprint has targeted mass-market customers such as families and teenagers.

"We believe that a potential combination of Sprint and Nextel would make sense on a number of measures, including spectrum position, network technology upgrade path and the complementary nature of the two customer bases," Merrill Lynch analyst James Moynihan said in a research report.

Nextel shares, which traded down all day, jumped nearly 4 percent after Reuters first reported the expected exchange ratio on the deal.

In late afternoon trading, Nextel shares then shed 30 cents on the day to $29.51. The shares were pulled off their day's highs after Sprint shares fell nearly 4 percent on the news. Near the close of trading Sprint shares were down 33 cents, or 1.4 percent, at $23.95.

The companies, which have held on-again, off-again talks over the past year, renewed negotiations in recent days for an all-stock deal that would create a wireless company with about 39 million customers, sources said.

A deal may involve Sprint eventually spinning off its traditional telephone business so a combination between Nextel and Sprint would be a pure wireless company, the sources said. The combined company might keep both the Nextel and Sprint brand names, the sources said.

Nextel's stock slumped earlier in the day as investors feared the company could be left without a partner if a rival emerged with a bid for Sprint, analysts said.

Media reports said Verizon Wireless, the second largest U.S. wireless company, could be interested in making a bid for Sprint.

Yet Verizon Wireless, jointly owned by Verizon Communications Inc. and Britain's Vodafone Group PLC, previously looked at the assets of both Sprint and Nextel and decided not to make an offer for either, sources familiar with the situation told Reuters.

Verizon Wireless declined to comment.
Technology Hurdles

Although Nextel lacks an abundance of wireless spectrum, it boasts some of the most loyal and lucrative corporate customers, drawn by its "push to talk" walkie-talkie phones. It also has among the highest average revenues per user and a strong brand name.

"If you put the two companies together, and Nextel becomes just average, then what does that mean for Nextel's stock price?" said Tom Egan, a high-grade telecommunications credit analyst at HSBC Securities in New York.

A merger would continue the long-awaited consolidation in the fiercely competitive U.S. wireless industry.

The largest U.S. cell phone company, Cingular Wireless, a joint venture of SBC Communications Inc. and BellSouth Corp., kicked off the year with a bidding war for AT&T Wireless Services Inc., which it bought for $41 billion. But there are still five large national mobile phone companies -- Deutsche Telekom AG's T-Mobile USA is No. 4 -- as well as several regional players.

"We believe consolidation in wireless may ultimately increase levels of competition in the sector, which is good for consumers, regulators and providing scale to a third competitor," said Michael Bowen, an analyst with Friedman, Billings, Ramsey & Co.

Based on Thursday's closing share prices, Sprint's market capitalization is more than $34 billion and Nextel's is about $33 billion.

Sprint (Research) stock rose close to 2 percent in after-hours trading. Shares of Nextel (Research) rose 1.4 percent after the closing bell.

Source

Wish I could find that predictions thread because I called it (the mergers of the cellular companies this year).

 

[Smiles and Cries]

What does this mean for my Sprint PCS bill?

 

[Tuvoc]

thank god. Now my nextel service won't suck!

 

[dskillzhtown]

Wonder what that will mean for my Sprint phone. Will I now get a phone so I can "Direct Connect" or whatever that walkie talkie crap is.

 

[DJ Sl4m]

Both of these 2 are severely lacking by themselves, around here these 2 have huge signal drop out ereas and are pretty much a joke.

Together they may be able to give Cingular some good competition.

 

[Dilbert]

Both of these 2 are severely lacking by themselves, around here these 2 have huge signal drop out ereas and are pretty much a joke.

Together they may be able to give Cingular some good competition.

But how? They are on totally different standards. Sprint is CDMA, and Nextel has a proprietary network called iDEN. As far as I know, it's non-trivial to connect the two networks.

 

[DJ Sl4m]

Not really by pooling them, but by selling off Sprints current set up, and using their combined resources for a more personal selection of options/phones for the Nextell line up and add more towers for the network.

 

[Cubsfan23]

Verizon > *

 

[ChumsGum]

Nextel could not use their current spectrum in order to upgrade to the next generation phones, they needed to get a new spectrum and the FCC didn't grant them that. This merger means that Nextel will now be using Sprint's CDMA network.

 

[DCX]

I'm assuming Verizon>>>>>>>>>>>>all. How is Cingular now that they merged with ATT Wireless? I was considering this option but i know Verizon has better coverage in my area...

DCX

 

[doncale]

Together they may be able to give Cingular some good competition.

 

[jobber]

the talk is to bring Nextel over to CDMA and YES not now, but maybe a year or 2 down the road, you can walkie talkie Nextel to Sprint. Direct Connect stuff is going through servers and all so it'll take a while to put everyone on the same boat.

 

[snapty00]

Maybe I'm in a weird area, but where I live, it really doesn't matter who you go with. The coverage and quality is about the same regardless of who you go with here. The main difference will be price, and even that's debateable.

Most of the people who have complained that I know of had more problems with their phones than their service, although they wrongly blamed it on the service.

 

[luxsol]

Whoa, I LOVED Vehicle Team Voltron! Did Lion Force and Vehicle Force actually meet up in the cartoon like this?

 

[Hurricane_Chris]

Whoa, I LOVED Vehicle Team Voltron! Did Lion Force and Vehicle Force actually meet up in the cartoon like this?

I think they did. I vaguely remember it when I was in like 5th grade. They like teamed up and had to fight Ro-beasts (or whatever they were called) that also merged and formed larger robots...At the time I stayed home sick from school and watched it and if my memories from 5th grade aren't lacking the episode was awesome.

 

[StoOgE]

Sprint is the only carrier in Austin that doesnt suck. Verizon is about to put in one of their pay wifi networks city wide, I dont know if that will make their coverage area any better or not... but back when I had Verizon and ATT both would drop calls in the middle of downtown Austin. Not cool.

Sprint, On the other hand is useless in larger crowds. At UT football games I keep getting "signal busy, try again later".

 

[Nester]

Wonder what that will mean for my Sprint phone. Will I now get a phone so I can "Direct Connect" or whatever that walkie talkie crap is.

Some Sprint phones already have the Ready Link service, walkie talkie, direct connect, etc. The Sanyo 8200 is one that I know of off the top of my head.

 

[ShadowRed]

I think they did. I vaguely remember it when I was in like 5th grade. They like teamed up and had to fight Ro-beasts (or whatever they were called) that also merged and formed larger robots...At the time I stayed home sick from school and watched it and if my memories from 5th grade aren't lacking the episode was awesome.

I don't know about them merging together but yes they did meet in a two parter/multipart show. The little kid characters on both shows were brothers. Green lion guy, I believe, and I don't know what vehical the kid on Team Voltron used.

 

[Beezy]

Wait, who's #1? Verizon or Cingular?

 

[xsarien]

Wait, who's #1? Verizon or Cingular?

In terms of subscribers, Cingular is at ~46 million post-merger, Verizon's at 42 million. It's a real problem for Verizon, though. They focus their ad campaigns on their coverage (which is pretty thorough), never on the price. But between Sprint/Nextel and AT&T/Cingular, they may finally have to lower their rates.

 

[FortNinety]

thank god. Now my nextel service won't suck!

Umm... not really. Talking as a Sprint customer here, and they really suck at times.

 

[SlickWilly223]

I have Cingular/AT&T, and so far I'm loving it.

My brother had Nextel up until a month ago when he dropped them. Bad service, not enough of his friends had the walkie-talkie thing, featurless phones.