What race? In essence, it’s the race to strong performance.

Sprint’s management wants to get there as soon as possible, as the rumors of a leveraged buyout of the struggling company are starting to fly a little more freely. The better Sprint does now, the higher the stock trades, effectively keeping the company out of reach for anybody thinking about adding a decent telecom business to their collection.

Any potential suitors, if there are any viable ones, are most likely in a race to raise funds. Knowing that better and better numbers are going to make the acquisition more expensive, the sooner any deal is done the better – or at least cheaper. The roadblock - aside from the wad of cash needed – is actually getting any lenders excited about the questionable idea of real growth in the wireless segment.

Where Are We Now?
The critical issue, of course, is figuring out who’s going to make it to their respective finish line first.

Most of Wall Street, for all intents and purposes, says the company is still struggling finishing up its turn-around story. However, they may want to take a closer look now.

In their fourth quarter, profits were up 32% on a quarter-over-quarter basis, even though sales grew at a mediocre 6%. The company's customer base increased by 1.3 million customers in Q4, bringing the grand total to 53.1 million. Though customer retention was still an issue, the kind of financial progress we saw Sprint make in Q4 has become a trend rather than a fluke.

The progress of any potential buyers, on the other hand, is something of an enigma. In fact, that might be the illness rather than just a symptom – is there really much of an organized effort to acquire this telecom that just looks so, well, acquirable?

For as juicy as it looks, no real suitors have come out of the woodwork yet. Or, maybe they’ve managed to keep any effort under tight wraps. If it’s the latter, then they deserve to be congratulated for keeping a secret so well. If it’s the former, then all the chatter may be for naught.

Sprint’s Lead is Widening…By Default
Sprint actually has a couple of things working in its favor, as far as any buyout is concerned.

First, though not necessarily foremost, Sprint is indeed starting to do something differently.

Sprint spent more than $7 billion last year mostly to widen its wireless network. The company recently announced more coverage in Boston, Miami, New York, and Baltimore, just to name a few. Each customer Sprint adds now is one that will have to be ‘paid for’ in an acquisition, not to mention the infrastructure bills any buyer would be inheriting

The second likely reason a buyout could be staved off is – in the same vein - the kind of money needed to make a bid. Even at today’s valuation, any reasonable acquisition offer would be one of the biggest ones ever made.

Goldman Sachs (NYSE: GS) puts the price tag somewhere at or above $80 billion. With that kind of number being digested, it’s not hard to understand why raising the money would be tough to do….just based on the sheer amount needed. As attractive as a weak-but-potentially-strong Sprint is, if nobody can afford it, then nobody can buy it.

Either way, it’s likely to be one of those rare win/win scenarios for investors.

If the company does as well as they expect to do, shareholders should reap the benefit for as long as the company can sustain that operating level. If instead the buyout rumors become a reality, then Goldman Sachs estimates about a 25% premium will be tacked on to the stock’s price. Such a buyout would cut the gravy off from what could be a nice longer-term holding, but there are worse things to have happen to shareholders than getting a nice premium for your stocks.