Bank Raymond James believes that now that Alltel (AT) has been sold to private equity interests, Sprint (S) will be next. Not a chance.
There are several reasons that the ownership at Sprint is not going anywhere. MarketWatch mentioned one: "Alltel can now spend more money on spectrum and thus put added pressure on rivals such as Sprint and T-Mobile" Another is that Sprint is losing ground to Verizon Wireless (VZ)(VOD) and AT&T Wireless (T) as the two larger companies pick up subscriber market share. A new owner would have to assume that it could arrest that slide, which is far from a sure thing.
But, the most compelling reasons for private equity to stay out of Sprint’s stock is its big bet on WiMax. Sprint is spending $3 billion with partners including Motorola (MOT), Intel (INTC), and Samsung to build a WiMax network that will reach 100 million potential customers in the US. Sprint’s next-generation broadband wireless will use this standard instead of more widely accepted 3G technology.
A buyer would have to get in the middle of one of the largest wireless bets in history, which is that WiMax, a fairly new technology, can work across a vast geography. While the plan may pay-off, it is too late to reverse the decision and too early to tell if it will reap large returns.
Sprint’s stock rose 4% on the Alltel buy-out news. But, Alltel is not putting all of its eggs in one basket.
Douglas A. McIntyre
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