Saturday, December 11, 2004

Sprint racing ahead.

This is definitely an item for an SEC investigation at some later point, but by now every publication has reported about the final round of merger talks between Sprint (FON) and Nextel (NXTL) . I own a few of both, bought at substantially lower prices - will post additional details when the merger is officially announced.

The market sees this as one of those great combinations - shares of both companies inched up after the leak. I personally don't see much upside after the merger, and will be selling my shares of the combined entity as soon as I get a chance. Both Sprint and Nextel, while cleaning up their balance sheets over the last 2/3 years, haven't really done much to innovate, retain customers or to provide high-end services. I personally have experienced the Sprint touch, and after 3 painful years switched to Cingular recently!

What does this merger mean for AT & T (T) ? It was rumored earlier that Sprint was in the running to buy AT & T. It now looks like BellSouth becomes the strongest contender to take out AT & T. At the current price, AT &T is a high-risk buy, but if it drops below $15/share, without a dividend cut, it is a good speculative takeover bet.

This transaction also should bring to an end any speculation that Sprint would go after MCI (formerly WorldCom). Sprint's earlier attempt (in 2000?) to merge with MCI was torpedoed by trust-busters. But MCI (MCIP) is still surely up for sale. Will Leucadia National (LUK), which already owns a minority stake, buy the rest of MCI ?


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