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Sprint Corp. and Nextel Communications Inc. on Wednesday unveiled plans for a $35 billion merger that would create the third-largest U.S. mobile phone network. The companies said they were signing up to a merger of equals in which shareholders of both operators would take take an equal holding in the new entity, to be called Sprint Nextel. Nonetheless, terms call for compensating Nextel shareholders with 1.28 shares in the new entity for each existing share they hold and to receive a cash payment of about 50 cents per share. Based on Tuesday’s closing share price of $25.10 for Sprint and $29.99 a share for Nextel, the deal values each Nextel share at $32.63, representing a 9 percent premium. The companies said the cash portion of the deal would not exceed $2.8 billion, giving a total value for the transaction of about $35 billion. The combined market capitalization of both companies, however, is about $70 billion. The unions of Sprint and Nextel could eventually yield cost savings of up to $12 billion, the companies said. The merger will create a mobile network with about 35 million customers, covering a geographic area of the U.S. inhabited by 262 million people. It will make Sprint Nextel the next-largest national mobile operator after Atlanta-based Cingular Wireless LLC and Verizon Wireless. Current Sprint chairman and CEO Gary Forsee will lead the new company while Nextel president and CEO Timothy Donahue will become its chairman, the companies said. The companies said the new operator will have the highest average revenue per user in the U.S. mobile phone industry. Combined pro forma revenue for Sprint Nextel for the year to September was about $40 billion. However, about $6 billion of that revenue was generated by Sprint’s local telecom business, which it said it plans to spin off to the company’s shareholders. Shareholders and regulators must approve the merger, which the companies expect to close in the second half of 2005. Copyright �2004 TDD, LLC. All rights reserved.

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