Qualcomm Inc (QCOM)

[khemara_qc]

bloomberg.com: Sprint and Nextel Shares Rise After Report of Merger (Update4)

http://quote.bloomberg.com/apps/news?pid=10000006&sid=aY9PGmDMYQHI

Dec. 9 (Bloomberg) -- Shares of Sprint Corp. and Nextel Communications Inc. rose after reports that the U.S. mobile-phone companies are in merger talks.

The combined company would be worth about $70 billion, financial news network CNBC said, citing unidentified people familiar with the situation. The Wall Street Journal said the companies are discussing a ``merger of equals.''

Pressure on mobile-phone companies to increase in size has grown since Cingular bought AT&T Wireless Services Inc. for $41.3 billion in October, becoming the biggest provider ahead of Verizon Wireless. Sprint Chief Executive Gary Forsee and Nextel Chief Executive Tim Donahue would combine their companies into the third-largest provider, with 33 million subscribers.

``There are some reasons why it would make sense,'' said Mark Hesse-Withbroe, who helps manage $125 billion of investments at U.S. Bancorp Asset Management in Minneapolis, including Sprint shares. ``Among the Nextel, Sprint, Verizon camp, it's probably where a merger would most likely take place.''

Nextel spokeswoman Audrey Schaefer declined to comment. Sprint spokesman Scott Stoffel also declined to comment.

Shares of Sprint, which ranks third in the U.S. market, rose $1.78, or 7.9 percent, to $24.28 at 2.42 p.m. in New York Stock Exchange composite trading. Nextel, the largest-provider of push- to-talk mobile telephones, rose $1.84, or 6.6 percent, to $29.81. Verizon Wireless and Cingular shares don't trade.

Building Networks

A merger of Sprint and Nextel would reduce the number of large U.S. mobile-phone providers to four from five.

A combined Nextel, with 15.3 million subscribers, and Sprint, with 17.3 million, would also come closer to Cingular and Verizon in size. Cingular has more than 47 million subscribers and Verizon has more than 42 million.

Overland Park, Kansas-based Sprint would gain access to Nextel's business customers, who pay higher monthly bills and are more loyal than customers of any other national wireless carrier. Nextel's average monthly bills were $69 and its monthly rate of customer turnover was 1.5 percent in the third quarter, compared with Sprint's $63 in average monthly bills and churn of 2.7 percent.

Nextel loses a smaller percentage of subscribers than any other mobile-phone company in part because it sells a combined walkie-talkie wireless service that outperforms competitors' copycat versions, analysts and investors have said.

High-Speed

Sprint's network would give Reston, Virginia-based Nextel a head start in upgrading its existing airwaves to high-speed technology, Hesse-Withbroe said.

Nextel Chief Financial Officer Paul Saleh said today the company will announce by February its choice of suppliers to expand its wireless data network. Nextel is testing two systems for making its wireless network capable of carrying non-voice services, Saleh told analysts at a Credit Suisse First Boston conference in New York.

Sprint, Verizon and Cingular also are developing so-called third-generation or 3G mobile networks to help turn mobile phones and laptops equipped with wireless cards into devices with quick Internet access. Users will be able to transmit documents, music files, photos and video clips almost as quickly as they can now with cable modems and high-speed phone lines.

Donahue and Forsee

Donahue, 55, led Nextel since 1996, after cellular pioneer Craig McCaw invested in the company. In the past two years the shares have more than doubled as Nextel returned to profit and increased revenue per user.

Forsee, 54, returned to Sprint from BellSouth Corp. in March 2003, taking over a company that was losing market share in local, long-distance and mobile-phone rankings. The shares have risen 48 percent this year, buoyed by improving profits. Forsee has reduced headcount by 11,000 since becoming chief executive.

Sprint's PCS mobile-phone business now generates more than half its revenue, compared with about 17 percent five years ago, will probably grow to almost two-thirds of Sprint's revenue in 2008, Morgan Stanley analyst Simon Flannery estimates. Long- distance sales accounted for a quarter of Sprint's $6.87 billion in revenue in the second quarter, down from about half five years ago.

In a September interview, Forsee described acquisitions as ``risky'' and said he was focusing on developing partnerships.

There are ``lots of opportunities for us to not just rely on M&A, which can be a very distracting scenario, and to rely on partnering to take advantage of our assets,'' Forsee said.



To contact the reporter on this story:
Chris Johnson in Princeton at [e-mail].

To contact the editor responsible for this story:
Emma Moody at [e-mail].
Last Updated: December 9, 2004 17:02 EST