With Sprint Nextel (NYSE:S) shares up 136% so far this year and $6.8 billion in available cash, rumors are circulating that the company may be poised to purchase another wireless company.
Those rumors were bolstered by recent comments Sprint CEO Dan Hesse, who said earlier this month that consolidation would be good for the wireless industry and that Sprint would play a role in that consolidation, Bloomberg noted.
The wireless service provider has struggled to keep customers and reverse losses since its disastrous $36 billion acquisition of Nextel in 2005. After five years of annual losses, the company is shutting down the Nextel Network.
Perhaps recalling the Nextel debacle, Sprint shares sank about 2% in Wednesday morning trading as investors digested reports of a potential purchase.
Analysts noted that Sprint’s debt remains larger than its market capitalization, but that the cash on hand and rising stock price strengthened its position to negotiate a major purchase.
MetroPCS Communications (NYSE:PCS) and Leap Wireless (NASDAQ:LEAP) were among the potential candidates cited by analysts for a takeover by Sprint. Acquiring a smaller rival would give Sprint a quick way to increase its subscriber base in order to better compete with AT&T and Verizon.