Sprint (S) Value So Low Must Merge

After the offer by AT&T (NYSE:T) for T-Mobile, it appears that Sprint Nextel Corp. (NYSE:S) has been put in the postiion where it must make a merger deal with someone.

Sprint’s 11 percent plunge to $4.49 after the announcement of the T-Mobile USA deal has left its stock trading below the company’s $4.87 a share in assets minus liabilities. That means investors can now buy Sprint for 92 cents on the dollar, cheaper than 99 percent of companies in the Standard & Poor’s 500 Index excluding financials, according to data compiled by Bloomberg. Sprint’s licenses from the U.S. Federal Communications Commission, which give it the right to operate its network in specific regions, alone are worth $19.9 billion, 46 percent more than its market capitalization of $13.6 billion, the data show.

AT&T’s purchase of T-Mobile USA from Deutsche Telekom AG (DTE) will give the combined company more than double the customers of Sprint, while Verizon Wireless has almost twice the market share. To boost value, Overland Park, Kansas-based Sprint may buy the remaining stake in partner Clearwire Corp. (CLWR) or another carrier such as MetroPCS Communications Inc. (PCS), according to Dan Hays, a director at consultancy PRTM. It may also become a target for Verizon as carriers that run on the same network technology are forced to combine, he said.

“Someone, whether it’s Sprint or Verizon (NYSE:VZ), is going to have to serve as a catalyst for the consolidation,” said Washington- based Hays, who specializes in telecommunications. “What’s clear is that they can’t all afford to remain independent.”

Sprint closed Wednesday at $4.49, up $0.02, or 0.45 percent.



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