Sprint shares soar on talk of Deutsche Telekom bid

FRANKFURT/NEW YORK -- Shares of Germany's Deutsche Telekom, which owns T-Mobile USA, fell 1.5% Monday on concerns that an acquisition of Sprint Nextel would be too costly and tough to integrate. Sprint has a market value of $12 billion and more than $19 billion in long-term debt and other liabilities.

"Despite the potential benefits of a merger we believe a combination would also present several challenges," Piper Jaffray analyst Chris Larsen said in a research note.

Sprint and Deutsche Telekom declined to comment on reports that DT is looking at a bid for Sprint, first reported in Britain's Sunday Telegraph. CNBC, citing anonymous sources, reported that Sprint was not aware of any overtures from Deutsche Telekom.

Besides moving Sprint shares, the speculation also pushed up the company's bonds. Sprint's 6.875% bonds were up 4.25 cents at 78.5 cents on the dollar, according to Market Axess.]

A combination of Sprint, the No. 3 U.S. mobile service with about 49 million customers, and T-Mobile USA, the fourth- biggest in the United States with about 33 million, would create the second-largest wireless carrier in the country. They would vault past No. 2 U.S. service AT&T but still trail Verizon Wireless, owned by Verizon Communications and Vodafone Group.

While both Sprint and T-Mobile USA are losing ground in the fiercely competitive U.S. market, some analysts said a merger is unlikely to happen as it would be a technological nightmare. Sprint already runs two separate networks, both of which are incompatible with T-Mobile USA's network.

Larsen noted that the companies would have to build a single network in order to generate savings, and they could potentially lose more market share to rivals as they focus on the complicated integration.

Another analyst, John Hodulik of UBS, said a deal was unlikely given the "significant negative impact it would probably have on DT's financials."