Sprint Nextel Corporation (S): Is It Looking to Be a Buyer?

Sprint Nextel Corporation (NYSE:S) has seen a surge in its stock price over the calendar year, moving from below $2.50 a share in January to closing Friday at $5.19. With such a meteoric rise, there has been some chatter going around the wireless market, and it actually is the kind of chatter that puts Sprint Nextel in an interesting position.

Sprint Nextel Corporation (NYSE:S)

There is one side that says Sprint Nextel Corporation (NYSE:S) just might be looking to acquire another company. There is the other side that says the dramatic increase in stock price signals that the company may be acquired by someone else. This might be investment purgatory, or being between a rock and a hard place.

But how much of the talk is legitimate? Well one piece does throw out speculation that Samsung Electronics and Apple Inc. (NASDAQ:AAPL) could make a play for the wireless carrier as they both have large war chests of cash to afford such an acquisition – and since both companies are in the wireless business through their handsets, it might make sense to get further involved in the wireless industry and perhaps have a carrier that would only sell iPhone or Galaxy smartphones. But that was quickly pushed aside because neither company has expressed any public interest in making such a deal.

So that piece, and a second one both seem to cover the idea that Sprint Nextel Corporation (NYSE:S) may be positioning itself to consolidate the wireless market by looking to buy one of the smaller players – MetroPCS Communications Inc. (NYSE:PCS) and Leap Wireless International Inc. (NASDAQ:LEAP) seem to be the two more likely candidates.  However, the board of directors shot down a potential acquisition of MetroPCS earlier this year, so the chances of that coming to fruition again is remote.

However, there seems to be some synergy with Sprint Nextel Corporation (NYSE:S) and either of those companies – Sprint, which needs more capacity to compete with AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) on the new 4G LTE network, see MetroPCS Communications Inc. (NYSE:PCS) having spectrum that is right next to its own, which makes it easy to acquire; and Leap Wireless International Inc. (NASDAQ:LEAP) uses the same technology as Sprint, so customer transfer would be easy.

But is there a third potential option? T-Mobile USA, which AT&T Inc. (NYSE:T) tried to acquire earlier this year before federal regulators nixed the deal, has not started on its 4G LTE network – which could save Sprint Nextel as much as $20 billion by not having to make conversions; however, much of that cost savings may be offset by differing technology, which means handset changes and the risk of customer losses.

Sprint Nextel Communications Inc. (NYSE:S) CEO Dan Hesse said earlier this month, “We’re certainly working very hard to compete with AT&T and Verizon. The gap between the No. 2 and No. 3 players is enormous. We always have been and always will be open to further consolidation, as long as it isn’t AT&T or Verizon Wireless.”

Is this a signal that Sprint Nextel is shopping for a consolidation? Only time will tell, but the company can only be helped in that endeavor by the bullish rally of the stock.