Analysts: Verizon/Sprint Deal Would Face Hurdles

Analysts at investment firm Legg Mason said Tuesday any Verizon plan to acquire Sprint would face a
“significant” hurdle from government regulators.

Legg Mason released the report to investors in the wake of a Wall Street
Journal
report that Vodafone — Verizon’s joint venture
partner in Verizon Wireless — would support any Sprint buyout plan.

“While we believe such a combination would yield synergies enabling Verizon
to pay a premium from current levels, a deal is unnecessary for Verizon’s
continued wireless success,” the report stated. “It would face significantly greater risk that
the deal would be blocked by the government than the risk that a
Sprint/Nextel deal would be blocked by the government,” the Legg Mason
report stated.

Sprint is rumored to be in merger talks
with Nextel , and
news reports suggest an announcement could be made on the deal as early as
tomorrow. A Verizon buyout of Sprint then, according to the report, would hurt both Sprint and Nextel.
Nextel would be left without a partner and face a network-wide,
multi-million dollar upgrade on its own.

“If the government were ultimately to say no to a Verizon/Sprint deal,
Verizon could benefit from the relative weakness of Sprint and
Nextel during that period and in particular, a delay in those two companies
being able to develop a stronger wireless data offering,” the report states.

Verizon Wireless used to be the dominant carrier in the United States until its
competitor, Cingular Wireless — a joint venture
between Bell South and SBC — acquired
AT&T Wireless for $41 billion
earlier this year.

Verizon Wireless officials were unavailable for comment at press time.

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