South Korea's SK Telecom Co. saw its shares end lower Wednesday, as investors questioned the merits of a potential tie-up with ailing US operator Sprint Nextel. This is very much in contrast to the Sprint stock, which sprinted more than 10 per cent in trading Tuesday after a report that it is in talks to sell to SK Telecom.

CNBC reported on Tuesday that South Korea-based SK Telecom is in talks to buy Overland Park, Kansas-based Sprint, citing unnamed sources. The story said a deal is not imminent and could be weeks away at best.

The news pushed up Sprint stock as high as $9.75 a share on Tuesday. The stock closed on Tuesday at $9.04, up 78 cents, or 9.4 per cent, on volume of 83.7 million shares. The stock's average daily volume in the past three months has been 34.3 million shares traded on the New York Stock Exchange.

However, on Wednesday, SK's fortunes were completely the opposite. Shares of South Korea's largest mobile operator by revenue ended 2.7 per cent lower at 181,500 won ($178.98) in Seoul.

However, other media outlets have reported on a possible collaboration between the two entities and not a takeover. The Wall Street Journal reported yesterday that SK and Sprint are in preliminary talks over forming a strategic partnership to develop new handsets and services.

Last November it was reported that Sprint had rejected a $5-billion investment offer from SK Telecom and Providence Equity Partners.

Last month, SK Telecom became an investor with an approximately 17-per cent stake in Virgin Mobile USA Inc, as part of a deal in which Virgin Mobile bought wireless provider Helio for $39 million in equity. Virgin Mobile was formed in 2002 as a joint venture between Sprint and United Kingdom-based Virgin Group. Helio was a joint venture of SK Telecom and Atlanta-based EarthLink Inc. (See: Virgin Mobile acquires Helios to enter postpaid zone)

Sprint Nextel Corporation is the third largest wireless telecommunications network in the US with 52.8 million customers behind AT&T (Cingular) and Verizon Wireless. Sprint is a global Tier 1 Internet carrier that makes up a portion of the Internet backbone. In the US, the company also operates the second largest wireless broadband network and is the third largest long distance provider.

The company was created in 2005 by the $35 billion purchase of Nextel Communications by Sprint Corporation. In 2006, the company spun off its local landline telephone business, naming it Embarq and also completed the $6.5 billion acquisition of Nextel Partners, one of its largest affiliates, which primarily provides Nextel wireless services to more rural markets.

The company employs more than 60,000 people and had annual revenues of $40 billion last year. However, it racked up losses exceeding $29 billion. Sprint has also struggled to reduce its customer churn rate that is one of the highest in the industry. Customers have been leaving Sprint due to what they perceive as poor customer service.

Owing to corporation's large debt, Fitch Ratings cut Sprint's credit rating to Junk status. S&P is also considering a similar move.