Shares of Sprint Nextel shot up 16% before settling up 4.4% at $22.42 in AH trading Monday after a news article said South Korea's biggest mobile carrier, SK Telecom, was planning to bid for the company. SK Telecom's shares also rose 4.5%. SK Telecom has denied the report, which appeared in the Korea Economic Daily. "We have no idea where and how the rumor has started, but it is not true," said SK spokeswoman Cindy Kang. Analysts consider a full buyout by SK Telecom unlikely in any case, since its $18 billion market cap amounts to less than a third of Sprint Nextel's $62 billion. A minority investment is a possibility, however, in view of SK's desire to expand its growth beyond Korea, where four out of five people have a cell phone. The article cited several unidentified brokerage sources who claimed SK Telecom has been in touch with private equity firms to discuss a joint bid for Sprint. SK operates Helio, a money-losing wireless JV with Earthlink, as well as a mobile joint venture in Vietnam. It also bought $1 billion of convertible bonds in China Unicom last year in a bid to tap the surging Chinese cellular market.
Sources: Reuters, MarketWatch, Bloomberg I, II
Commentary: Sprint's Customer Treatment Can't Be Good For Business • Sprint Admits It Is "Unable Meet Your Current Wireless Needs" • Is Sprint Next In Line For A Buyout After Alltel?
Stocks/ETFs to watch: Sprint Nextel Corp. (S), SK Telecom Co., Ltd. [ADR] (SKM). Competitors: Verizon (VZ), AT&T (T), Qwest Communications (Q). ETFs: Wireless HOLDRs (WMH), Telecom HOLDRs (TTH), Vanguard Telecom Services ETF (VOX)
Earnings call transcripts: Sprint Nextel Q1 2007
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