Sprint's Cold Korean Reception

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It must be pretty tough running a beleaguered wireless company like Sprint Nextel (NYSE: S) these days. Even as you work to fix problems within the company, you've also got to deal with scores of outside interests offering to "help." The latest rumor alleges that Korean wireless service provider and Motley Fool Global Gains selection SK Telecom (NYSE: SKM) wants to buy or take a significant stake in its U.S. wireless counterpart.

While Sprint Nextel has yet to comment on the rumored overture, SK Telecom issued a statement denying any interest in purchasing the company. The official response makes more sense than the rumor, since Sprint Nextel's more than $63 billion market cap dwarfs SK Telecom's $18 billion. Also, SK Telecom and partner EarthLink (Nasdaq: ELNK) have been actively pumping money into U.S. virtual operator Helio, so the deal wouldn't seem to fit with the Korean outfit's current U.S. strategy.

Speculation about a Sprint Nextel acquisition heated up when peer service provider Alltel (NYSE: AT) agreed to a $27.5 billion buyout in May. Many saw Sprint's struggles with deteriorating metrics as a beacon for buyers -- sort of like wrapping a juicy pork chop around your neck in a kennel full of pit bulls. It seems unusually easy these days to attract the interest of scores of cash-rich private equity firms such as the Carlyle Group, Blackstone Group (NYSE: BX), or Goldman Sachs' (NYSE: GS) private equity division. But in whatever negotiations have taken place so far, Sprint has opted for the "No Deal" button and moved on.

From this Fool's perspective, I'm surprised the market took a rumored deal between SK Telecom and Sprint Nextel seriously at all. Sprint Nextel's stock has risen roughly 30% since bottoming out earlier this year, making it a pricey takeover candidate given its current uncertainty in operations. And unfortunately for the contrarian in me, I see Sprint Nextel as suffering from the Goldilocks syndrome -- it's not so bad that it's a steal, but not so hot that it's a buy. It's priced with just the right lukewarm balance of uncertainty and speculation to make it unattractive to buyers -- particularly private equity -- looking for a predictable return.

Call up more Foolish insight:

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Fool contributor Dave Mock now thinks twice before offering hot dogs to even friendly-looking pit bulls. He owns no shares of companies mentioned here. He is the author of The Qualcomm Equation. The Fool's disclosure policy courts investors with unparalleled warmth and care.