Sprint Rumored to Be Ready for Acquisitions

by Christopher Freeburn | September 26, 2012 10:15 am

With Sprint Nextel (NYSE:S[1]) 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[2].

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[3].

Perhaps recalling the Nextel debacle, Sprint shares sank about 2% in Wednesday morning trading as investors digested reports of a potential purchase.

In recent years, Sprint has added Apple‘s (NASDAQ:AAPL[4]) popular iPhone and focused on developing its LTE 4G network to compete with rivals AT&T (NYSE:T[5]) and Verizon (NYSE:VZ[6]).

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[7]) and Leap Wireless (NASDAQ:LEAP[8]) 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.

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