Industry watches Sprint PCS IPO

News that Sprint is planning an initial public offering for its PCS business has some observers speculating that the company is grooming itself for a merger or to be acquired.

The IPO, which will involve $603 million worth of stock, is a result of the decision in May ofSprint PCS cable partners-Tele-Communications Inc., Comcast and Cox-to exit the business. Sprint created a tracking stock at that time, giving some to the cable companies in return for their investments and planning to offer additional stock to the public, said a company spokesman.

"It's our view that Sprint is non-survivable as a stand-alone carrier," said Tom Nolle, president of Cimi Corp. "The regulation of the [Bell companies] and eventual entry of mega players like SBC and Bell Atlantic into long-distance will create more competition in that space than smaller players like Sprint can stave off."

If Sprint sold off divisions, it would be "suicidal," Nolle said, "unless the reason you're doing it is because you think you can sell yourself to someone who doesn't want the thing you're selling off."

Carriers such as SBC and Bell Atlantic know that once they comply with FCC guidelines for opening their markets, they will immediately feel the results of competition. Thus they will need additional revenue opportunities, such as virtual private data services, Nolle said. Virtual private networks,which he predicts will account for $120 billion a year by 2010, requires a national network to be competitive. "Sprint is clearly a way that a regional [carrier] could become a VPN kingpin with a single acquisition," Nolle said.

AT&T and MCI may be interested in buying the PCS business, despite their different wireless technologies, Nolle said.

At least one analyst disagrees. The IPO is no indication that Sprint intends to sell off the PCS business, said Bob Egan, research director for The Gartner Group. "They want the PCS business to be measured on its own," he said. The IPO will also offer access to capital.

Sprint officials would not comment on the speculation.