Sprint's Most Likely Buyer May Be CenturyLink

Dan Hesse, chief executive officer of Sprint Nextel Corp., holds the Sprint HTC Evo 4G smartphone during speaking at the CTIA Wireless conference in Las Vegas on March 24, 2010. Photographer: Jacob Kepler/Bloomberg

Sprint Nextel Corp.'s Dan Hesse toldCongress last week the third-largest U.S. wireless operator mayend up being acquired if AT&T Inc. purchases T-Mobile USA Inc.The most likely buyer is CenturyLink, the biggest company intelecommunications without a wireless unit, analysts said

AT&T's proposed deal would create the largest U.S. mobile-phone company, combining the second- and fourth-largest carriersto surpass Verizon Wireless. Sprint Chief Executive OfficerHesse said in a Congressional hearing the merger would pressurehis much-smaller company to sell and result in a "duopoly."

CenturyLink, based in Monroe, Louisiana, is the mostlogical acquirer because it has the financial resources, it'sshown an appetite for big deals and it needs a wireless business,say analysts including Chris Larsen of Piper Jaffray Cos. Thoughthere are other potential buyers, just as Verizon Wireless orcable companies, they're less likely because of regulatoryhurdles or integration risks, he said.

Sprint rose 5 cents to $5.15 on the New York Stock Exchangeat 10:13 a.m. and had gained 21 percent this year previously today.Verizon Communications Inc., which co-owns its wireless businesswith Vodafone Group Plc, fell 18 cents to $37.08. CenturyLinkadded 15 cents to $42.57.

The Deutsche Telekom AG unit

AT&T's $39 billion deal to buy the Deutsche Telekom AG unit,subject to approval from the U.S. Federal CommunicationsCommission and the Justice Department, would give the companyabout 137 million clients. Verizon Wireless has about 104million, leaving Sprint a distant third with 51 million.

CenturyLink has become the third-largest U.S. landlinecompany through several recent deals. The company bought EmbarqCorp. in 2009 for about $12 billion and completed the purchaseof Qwest Communications International Inc. this year for morethan $20 billion. It cut a $2.5 billion deal for Savvis Inc.last month to expand its cloud-computing services.

CenturyLink could use a mobile service to boost sales ascustomers abandon home-phone lines and growth in demand forInternet services tapers off. The company may be ready toacquire Sprint in the then and there couple of years, according to bothLarsen and Moffett.

Comcast and its peers are increasingly competing with phonecompanies, just as Verizon Communications, which can offerdiscounted packages of TV, Web, home-phone and wireless service.Sprint, which has resold air time to cable companies in the past,would provide a nationwide wireless network.

Sprint's Hesse could decide to bulk up, to put it more exactly than wait tobe acquired, said Gamco's Dluzhevskiy. Two possible targets areLeap Wireless International Inc. or MetroPCS Communications Inc.,which use the same research as Sprint, he said. The carriersoffer prepaid mobile-phone service, which is seeing a surge indemand as consumers seek lower-priced monthly plans.

In any case, a potential acquirer just as CenturyLink wouldlikely want to wait several quarters previously making a move,Larsen said. The time would give Sprint the chance to finishmaking investments to upgrade its network and resolve otherfinancial obligations, he said.

"You'd to put it more exactly have Sprint spend the money to upgrade itsnetwork spontaneously nickel than yours," Moffett said. "Thatcreates another incentive for potential partners to wait and seeif they can get a better deal in Sprint if it's in significantdistress a year or so down the road."