Sprint's stock surge sparks M&A speculation

August 17, 2012 | By Phil Goldstein

The recent rise in Sprint Nextel's (NYSE:S) share price has stoked market speculation that the company could become a takeover target, or perhaps make an acquisition of its own.

The past few weeks--since the carrier reported second-quarter earnings--have seen Sprint's share soar upward. On July 31 the stock closed at $4.51 and then on Aug. 13, shares closed at $5.05, the first time Sprint's stock topped $5 in more than a year. The stock is now trading at $5.16 per share.

Some of the speculation seems somewhat outlandish, with Apple (NASDAQ:AAPL) and Samsung Electronics rumored as potential suitors for the carrier. Both companies have large cash hoards but neither has given any kind of indication of interest in acquiring a wireless carrier or becoming more directly involved in wireless networks.

More likely though is that Sprint would make a play for a smaller carrier.

"Sprint has been boosted by several things," Kevin Smithen, an analyst at Macquarie Capital, told Bloomberg. "There's also a sense that they will lead the eventual consolidation of the smaller players like MetroPCS (NYSE:PCS) and Leap [Wireless] (NASDAQ:LEAP), which will help them with deleveraging and also eliminate some of the competition."

Indeed, Sprint has left the door open for consolidation, as long as Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T) are not doing the acquiring. "We're certainly working very hard to compete with AT&T and Verizon," Sprint CEO Dan Hesse said earlier this month. "The industry has to deal with the issue of the duopoly. The gap between the No. 2 and No. 3 players is enormous. We always have been and always will be open to further consolidation, as long as it isn't AT&T or Verizon Wireless."

Sprint recently disclosed that Keith Cowan, the carrier's president of strategic planning and initiatives and its lead mergers and acquisitions executive, will leave the company at the end of September. A deal for MetroPCS was reportedly close to being finalized earlier this year but was killed by Sprint's board; Sprint has never confirmed or discussed any of the reports about the MetroPCS deal.

Earlier this week Sprint announced it closed an offering for $1.5 billion in fresh debt. Sprint said it intends to use the net proceeds from the offering for general corporate purposes, which may include redemptions or service requirements of outstanding debt, network expansion and modernization and potential funding of Clear wire (NASDAQ:CLWR). The same day it announced the close of the debt offering the company said it would redeem $1.5 billion in 2013 and 2015 debt maturities.