Sprint's Phone Could Ring Again

Remember when WorldCom (WCOM ) tried to buy Sprint (FON ) in March, 2000, only to be nixed by federal regulators? WorldCom would have paid $76 a share in stock for Sprint, the No. 3 long-distance carrier. Will there be a second-round fight for Sprint? "That's a likely scenario, with the market putting a low value on Sprint," says John Maloney, who runs M&R Capital Management, which is buying into Sprint not for its buyout appeal but as a sum-of-the-parts value play.

WorldCom, which soared to 64 in 1999, now trades at 14, which rules it out as a bidder, says Maloney. Sprint stock, which hit 75 in 1999, has also swooned, to 22, in the telecom slump. But that has made Sprint a tempting target, he argues. Maloney puts the intrinsic worth of Sprint's combined assets at 42 a share. Maloney values its local phone business alone at $22.5 billion, or 24 a share. Long-distance, with revenues of $7 billion, is worth 8. And the data and Internet business, with $3 billion in sales, is worth $9 billion, or 10 a share. The directory and products unit, worth $3 billion, should just offset Sprint's long-term debt of $3 billion, figures Maloney.

Who might snap up Sprint? Verizon Communications (VZ ) is a likely suitor, says Maloney. Now at 50, Verizon has a market cap of $137 billion. The No. 1 U.S. provider of wireline and wireless communications, it has 95 million access lines and 25 million wireless customers. With or without a deal, says Maloney, Sprint is an attractive call. Sprint and Verizon didn't comment.

By Gene G. Marcial

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