May 5, 2008: 5:16 PM EDT
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Sprint explores splinter strategy

The nation's No. 3 wireless player has a few spinoffs to consider, including ditching its Nextel unit.

By Scott Moritz, writer

(Fortune) -- Sprint may be exploring a set of spin-off options that would splinter the company into a number of parts.

The No.3 wireless shop is looking to sell or carve out its Nextel operation, according to a report in The Wall Street Journal. The potential move would help move the neglected iDEN two-way radio network off Sprint's hands now that the $35 billion merger has been widely seen as a failure.

The report comes as Sprint (S, Fortune 500) tries to finalize a deal with Clearwire (CLWR), Comcast (CMCSA, Fortune 500), Time Warner Cable (TWC), Intel (INTC, Fortune 500) and Google (GOOG, Fortune 500) to create a WiMax joint venture. The multi-player deal would help fund and build a nationwide broadband wireless network using fourth generation, or 4G, mobile Internet technology.

Other businesses being considered by Sprint for a sale or carve-out include the company's long distance group, said one person familiar with the strategy. The long distance unit is a holdover from an earlier business era where calls had tolls and users were billed by the distance and by the minute. The underlying fiber optic network that handled those calls is the value Sprint hopes to cash in on.

The breakup discussions started soon after the arrival of activist investor Ralph Whitworth of Relational Investors. Whitworth gained a seat on Sprint's board earlier this year. From a pro-breakup perspective, Sprint is seen as a company with too much debt and "a lot of assets not working together," said the source.

The news comes on the same day that Deutsche Telekom (DT) was reportedly considering a takeover of Sprint with an eye on merging it with its T-Mobile unit.

Sprint spent most of the past two years in a tailspin as Nextel merger integrations failed and management lurched in several questionable directions. As the weak third player in a highly competitive wireless market against AT&T (T, Fortune 500) and Verizon Wireless (VZ, Fortune 500), Sprint gained no ground. In fact, the company started losing customers in droves last year as angry Nextel customers canceled service.

Sprint has written down most of the value of the Nextel assets and some see the unit as a sales opportunity. The walkie-talkie network could be a good fit for emergency response and public safety groups interested in operating the service.

If the splinter strategy is successful, Sprint will be able to carry on as a pure wireless telco holding less debt and presumably more cash.

Of course Sprint's recent track record doesn't suggest any of these plans will turn out well. To top of page