July 16, 2008 / 1:25 AM / 12 years ago

UPDATE 1-SK Telecom shares fall after Sprint buyout reports

(Adds SK declining to comment, analyst comments)

SEOUL, July 16 (Reuters) - Shares in SK Telecom (017670.KS), South Korea’s top mobile carrier, fell early on Wednesday after a CNBC report that it was negotiating to buy Sprint Nextel Corp (S.N), the No. 3 U.S. mobile service.

Sprint and SK declined to comment. Sources familiar with the matter told Reuters SK Telecom and Sprint were in preliminary talks about collaborating on technology and said there were no acquisition talks.

Still, Sprint shares closed 9.44 percent higher overnight on hopes for an acquisition. SK Telecom fell 2.95 percent to 181,000 won by 0104 GMT, against the benchmark Seoul stock index's .KS11 0.81 percent gain.

“Sprint is up for sale and SK Telecom is considering a deal, that’s what people widely believe, but there are uncertainties about how much of a stake in Sprint could be sold and how the deal could be funded,” said Lee Shi-hoon, an analyst at Hyundai Securities.

“SK has seen poor results from its overseas investments so far, especially in the United States. The uncertainty surrounding talk of a new deal is negative.”

Sprint already rejected a $5 billion investment by SK and a group of private equity firms last year, sources previously said.

SK, which controls about half of the South Korean mobile market, is seeking growth overseas as competition intensifies in the saturated domestic market, where more than 90 percent of the population has a mobile phone.

But it has yet to successfully penetrate key markets such as the United States and China. SK agreed in late June to sell its money-losing U.S. mobile unit, Helio, for $39 million in stock to Virgin Mobile USA VM.N and to invest $25 million in Virgin Mobile.

Both Helio and Virgin rent space on Sprint’s network.

“A deal involving the three — SK, Virgin and Sprint — could make sense,” Lee said. (Reporting by Rhee So-eui; Editing by Jonathan Hopfner)

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