SK Telecom and Sprint: Considering alliance, not merger

Yesterday's CNBC story about a potential merger between SK Telecom and Sprint is being debunked. The Wall Street Journal and a few other news outlets are reporting SK Telecom and Sprint are considering a partnership in which they would jointly develop handsets and services. In November, Sprint rejected a $5 billion investment offer from SK Telecom and Providence Equity Partners and WSJ sources say any investment resulting from the current talks would be much smaller.

In a blog posting yesterday about the rumored deal, Pali Research analyst Walter Piecyk said since that first offer in November Sprint's fundamentals have eroded. He also speculated that SK might be considering an equity investment in Sprint and not a merger.

Recently, Sprint has shown some signs of a rebound. The company's new Samsung Instinct phone is selling well and the company is expected to have improved its churn when it reports its second-quarter earnings Aug. 6.

In late June, SK Telecom invested $25 million in equity capital in Virgin Mobile USA as part of Virgin's acquisition of MVNO Helio. SK will have a 17 percent investment in Virgin Mobile and two seats on the Virgin Mobile board of directors. The deal is supposed to close in the third quarter.

For more:
- see this WSJ report (sub. req.)

Related stories:
SK Telecom contemplating Sprint acquisition
Virgin buys Helio for $39 million