Sprint, it's time to take the money

Sprint, it's time to take the money

The rumors are rife over acquisition and spin-off scenarios for troubled Sprint. Deutsche Telekom might make a play for Sprint, Sprint may spin off Nextel and Verizon might try to buy Sprint.

The bottom line is: There is no easy fix for Sprint. CEO Dan Hesse recently admitted that the problems facing the operator are more difficult than he anticipated. He's already done a lot internally, cutting 4,000 jobs, reducing the number of distribution points and consolidating the the company's headquarters. Now it's time to make the drastic moves, and one has to be looking for outside investments.

Back in December, Sprint reportedly wouldn't even entertain a $5-billion investment from SK Telecom and PE firm Providence Equity Partners that included installing Sprint's former chairman Tim Donahue as CEO of the company (I have a feeling it was installing Donahue that was the sticking point since former Sprint and Nextel executives love to point the finger at who messed this acquisition up). Now it's time to start courting the PE firms and foreign investors who want a piece of the U.S. wireless market.

Many private equity firms have funds to spend, and they want to spend it in the telecom industry these days. We've seen some high-profile private equity moves in telecom recently, including the buyouts of Covad Communications, Bell Canada and Alltel Wireless. 

Analysts predict that with the economy teetering, PE firms will look to telecom carriers and vendors who have high cash flow and manageable debt as new investment opportunities. The beauty of privately led leveraged buyouts is that investment groups have the ability to reshape the business in a manner that previous management and relationships could not and without investors breathing down their necks. These companies have the financial capability to buy other companies that will complement some of these businesses. They can sell non-core businesses and add to the core capabilities. The net result can be a high-value company. -Lynnette

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