Can the Germans Save Sprint?

We already know that Sprint Nextel (NYSE: S  ) sorely needs a white knight to ride in and save its bacon.

Palm (Nasdaq: PALM  ) has tried to make Sprint hip again with the fancy Palm Pre handset. No dice. Google (Nasdaq: GOOG  ) is sort of giving it a go as Sprint introduces Android-based smartphones. We'll see how that works out in a few months.

But perhaps Sprint's savior will rise from Germany.

T-Mobile parent company Deutsche Telekom (NYSE: DT  ) is trying hard to turn around the flagging fortunes of T-Mobile in Britain and the United States. Recently, T-Mobile UK announced a merger with competing mobile carrier Orange, which is owned by France Telecom (NYSE: FTE  ) . This deal would create the leading mobile network in the UK market if approved. (It's also probably the first time Germany and France have joined forces to subjugate the English.)

And well-respected British newspaper The Daily Telegraph now reports that Deutsche Telekom is looking to repeat that deal Stateside. Folding Sprint into T-Mobile would transform two also-rans into an instant competitor to Verizon (NYSE: VZ  ) Wireless and AT&T (NYSE: T  ) with more than 78 million combined subscribers.

The Telegraph is leaning on anonymous sources in the grand old Wall Street Journal tradition. There has been talk about a deal like this for a year or more, but serious talks started about three months ago. That sounds like an opportunistic play by Deutsche Telekom. Watching the Pre launch barely making a difference to Sprint, the Germans may have seen an opportunity to do a ride-by rescue on the cheap. Sprint's shares fell 28% between early May and last Friday, while the S&P 500 benchmark cheerfully recovered to the tune of 12%.

But the faceless insiders also noted that T-Mobile is looking at other ways to turn the sinking ship around as a standalone business. And there are many reasons why that is the more likely outcome here: The erstwhile partners run on vastly different network technologies today, and are committed to different next-generation technologies as well. Also, our regulatory bodies might not want the German government to hold a major stake in a company that holds about one-third of our mobile networks.

All things considered, I'd be very surprised to see T-Mobile joining forces with Sprint. The only major consolidation move that would make sense in the light of technical challenges and political pressures would be Verizon Wireless plus Sprint -- but the antitrust guys might not like that combination. So those Sprint shares should give back this rumor-induced 13% pop before too long.

That's just one Fool's opinion, of course. What do you think? Share your wisdom in the comments below.

Google is a Motley Fool Rule Breakers selection. Sprint Nextel is a Motley Fool Inside Value recommendation. France Telecom is a Motley Fool Income Investor pick. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund owns shares in Google, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.


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  • Report this Comment On September 15, 2009, at 5:43 PM, Aryabod wrote:

    The most important thing to notice regarding this rumor is that Sprint is a hell of a bargain at $4. At this price even incompatible platforms make sense. IMHO Telefonica is a much better suitor for Sprint than DT. TEF has much deeper pockets and competes with Vodafone and DT, both of which have a presence in the US via Verizon and T-Mobile, TEF has no quality presence here in North America. TEF also is a wholly owned public company with no foreign gov't involvement. TEF also has more than $11 Billion in cash and a market cap of about $125 Billion, making it the largest European telecom, even larger than VOD, Verizon wireless' european partner. If TEF wishes to remain #1 it will be pressured sooner rather than later to make a move into North America. VZ and ATT are just too large and T-Mobile is owned by DT, hence the only logical choice would be Sprint and you can rest assured Sprint won't be this cheap forever.

  • Report this Comment On December 11, 2009, at 2:58 PM, Fool wrote:

    I agree Sprit looks good in many ways so I got in at $4.00 and yes it can go down but what didn't.

    One thing I would like to comment on is that I think it was a smart move to go after the pre paid market as Sprint did .just look at the unemployement record and the bad credit cause of the houseing bust and tell me who would sign a 2 yr contract with people without jobs or credit.? Pre-Paid will fill that hole

    Smart move on the pre-paid Sprint you are way ahead of the game.I think your subscribtions will be heading up that is if I follow all the newew right on jobs/employment and Recovery right these next years will be hard but people are hook oh phones even if it is only issued in minutes..

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