Communication Solutions

Rumors circled Sprint Nextel (News - Alert) earlier today as the company rejected a $5 billion offer. While there was great speculation as to who made the offer, the telecommunications giant wasn’t talking.

While at one time, Google (News - Alert) was perceived as a potential buyer, the offer was in fact made by South Korea’s SK Telecom and private equity firm Providence Equity Partners.

The proposal was designed such that the two organizations would partner to invest $5 billion in the company and install its former chairman, Tim Donahue, as chief executive, according to individuals familiar with the situation.  
 
The deal was proposed by Mr. Donahue and the investment consortium before Thanksgiving, sending the bid to Sprint’s board in the form of a letter. Sources state that the board did not grant Mr. Donahue or the investors an audience before voting to turn down the offer.
 

It is no secret that Sprint has been searching for a new CEO after last month’s departure of Gary Foresee. Mr. Donahue, who served as CEO of Nextel Communications Inc. and negotiated its sale to Sprint in 2004 for $35 billion, became chairman of the combined company after the merger closed in 2005. Donahue stepped down late last year.

Those familiar with the situation noted that Donahue was prepared to return to the helm as CEO and had plans to bring in a full slate of top executives to handle marketing and operations.

Much talk surrounded SK Telecom mid-summer when word first got out that the company was planning to make a bid for Sprint Nextel. The Korea Economic Daily had cited brokerage sources as saying SK Telecom had been contacting several private equity funds during the first half of 2007 regarding a joint bid for Sprint Nextel.

These rumors were debunked by the foreign telecom’s top mobile operator who officially denied that the company was preparing to make a bid for the No. 3 US wireless firm. It now looks like it was just too soon to let the cat out of the bag.

There is significant speculation throughout the industry as to what such a bid would mean, if it were indeed taken seriously by Sprint Nextel. The board’s refusal to meet with SK Telecom or Donahue and its subsequent refusal of the bid speaks volumes as to its interest in even entertaining the idea.

And, while it may be interesting to see offshore operations getting into the game here, this attempt is not likely Donahue’s smartest in trying to regain his corporate status. Unless his phone is already ringing, Sprint is likely looking elsewhere.