Sprint Corp. and Nextel Communications today agreed to merge in a $35-billion deal, creating the nation's third-largest cellular telephone company.
The merger, which had been expected, was announced as the industry's top players pair off in a series of mergers and acquisitions that are creating huge communications companies. In October, Cingular completed its acquisition of AT&T Wireless for more than $41 billion, surpassing rival Verizon Wireless as the nation's largest cellphone company.
Sprint Nextel would serve more than 35 million customers and generate about $40 billion a year in annual revenues. As part of the deal, Sprint would spin off its land-line telephone business into a separate company that would be owned by the shareholders of Sprint Nextel.
Both companies said the transaction would better prepare them to compete. Sprint brings its large and sophisticated communications network to the table while Nextel contributes its larger base of business customers.
"This merger positions Sprint Nextel for greater success than either company could have achieved alone," said Sprint Chairman Gary Forsee, who will serve as president and chief executive officer of the combined company, in a statement. "Together, we will be positioned to provide the high-value, integrated communications solutions customers increasingly demand."
Under the deal, shareholders of both companies would end up owning half of the merged Sprint Nextel. Sprint shareholders would retain their existing stock while Nextel shareholders would receive 1.3 shares in the new company and a small amount of cash.
Wall Street investors did not seem too excited about the merger. On the New York Stock Exchange, Sprint shares were down 56 cents to $24.54 in early afternoon trading. On the Nasdaq, Nextel shares fell 56 cents to $29.43.
The merger, which was approved by the boards of both companies, must still win final approval from shareholders and government regulators.
Nextel's offices in Reston, Va., will serve as the merged company's executive headquarters, while operations will be based at Sprint's home in Overland Park, Kan.