So The Wall Street Journal reports today -- according to its favorite "people familiar with the situation" sentence -- that wireless provider Sprint Nextel Corp. (NYSE: S) is considering spinning off or selling its Nextel unit. This is when I hear the screeching sound of a needle scraping a record. Say what? Should we play that again?
I guess I shouldn't really be that surprised since the $35 billion acquisition of Nextel Communications Inc. in 2005 has always seemed, to say it mildly, challenging. This would be, as the Journal puts it, "a dramatic acknowledgment" that the merger has actually been a failure.
Well, only Monday we heard that Deutsche Telekom AG (NYSE: DT) may be interested in Sprint. Could it be that either Deutsche Telekom demanded such an action, or that Sprint management decided such an action could entice DT to indeed go forward with an offer (despite the probable problems such a merger could face, as Jonathan Berr outlined in his post Monday)? Without Nextel, Sprint would rid itself of much debt. It is also considered to have better handsets and fewer dropped calls, making it a more attractive target.
The differences in corporate culture made the now three-year-old merger difficult and Sprint has lost subscribers while its competitors added them. Of course, the stock price has suffered as well, down over 60% since the merger. No wonder then that Sprint is looking to undo the merger. The Journal lists several options, including selling Nextel to a consortium of investors related to Nextel's founder Morgan O'Brien. Other possibilities of course include private equity firms, or a spin off of Nextel.
