Sprint Nextel Corp.’s Dan Hesse told Congress last week the third-largest U.S. wireless operator may end up being acquired if AT&T Inc. purchases T-Mobile USA Inc. The most likely buyer is CenturyLink, the biggest company in telecommunications without a wireless unit, analysts said

AT&T’s proposed deal would create the largest U.S. mobile- phone company, combining the second- and fourth-largest carriers to surpass Verizon Wireless. Sprint Chief Executive Officer Hesse said in a Congressional hearing the merger would pressure his much-smaller company to sell and result in a “duopoly.”

CenturyLink, based in Monroe, Louisiana, is the most logical acquirer because it has the financial resources, it’s shown an appetite for big deals and it needs a wireless business, say analysts including Chris Larsen of Piper Jaffray Cos. Though there are other potential buyers, such as Verizon Wireless or cable companies, they’re less likely because of regulatory hurdles or integration risks, he said.

“CenturyLink is a company with a really good balance sheet and looking for areas to invest its capital, its free cash flow in growth,” said Larsen, who is based in New York. “If Sprint can stabilize and then begin to grow its customer base, it becomes a growth vehicle for them.”

Scott Sloat, a spokesman for Sprint, Debra Peterson, a spokeswoman for CenturyLink, and Tom Tauke, a Verizon spokesman, declined to comment.

Sprint rose 5 cents to $5.15 on the New York Stock Exchange at 10:13 a.m. and had gained 21 percent this year before today. Verizon Communications Inc., which co-owns its wireless business with Vodafone Group Plc, fell 18 cents to $37.08. CenturyLink added 15 cents to $42.57.

Litmus Tests

AT&T’s $39 billion deal to buy the Deutsche Telekom AG unit, subject to approval from the U.S. Federal Communications Commission and the Justice Department, would give the company about 137 million customers. Verizon Wireless has about 104 million, leaving Sprint a distant third with 51 million.

Regulators are now considering whether to allow two companies to control about three quarters of the market. They probably wouldn’t let Verizon or AT&T buy Sprint, which would result in almost all the market in the hands of two companies, said Sanford C. Bernstein & Co.’s Craig Moffett.

“Any of the litmus tests that they use in Washington would, by definition, mean that the second deal would be harder than the first,” said Moffett, who is based in New York and has an “underperform” rating on Sprint shares.

CenturyLink’s Deals

CenturyLink has become the third-largest U.S. landline company through several recent deals. The company bought Embarq Corp. in 2009 for about $12 billion and completed the purchase of Qwest Communications International Inc. this year for more than $20 billion. It cut a $2.5 billion deal for Savvis Inc. last month to expand its cloud-computing services.

CenturyLink could use a mobile service to boost sales as customers abandon home-phone lines and growth in demand for Internet services tapers off. The company may be ready to acquire Sprint in the next couple of years, according to both Larsen and Moffett.

“If CenturyLink imagines itself as a long-term player in the enterprise segment, they may need to add wireless,” said Moffett. “You have to put them as perhaps the most likely long- term acquirer” for Overland Park, Kansas-based Sprint.

CenturyLink’s market value was about $25 billion, compared with about $15 billion for Sprint, before today’s trading. The company bought both Embarq and Qwest with stock. A deal for Sprint would reunite the wireless company with Embarq, a landline operator that spun off from Sprint in 2006 and was run by Hesse at the time.

CenturyLink completed the Qwest deal in April and may want to finish absorbing the new customers and assets before taking on another large merger, Larsen said.

Cable Combo

Cable companies such as Comcast Corp. might also explore buying Sprint to add wireless to their service bundles, said Sergey Dluzhevskiy, vice president at Gamco Investors Inc., which owned about 13 million shares of Sprint at the end of last year according to regulatory filings.

Comcast and its peers are increasingly competing with phone companies, such as Verizon Communications, which can offer discounted packages of TV, Web, home-phone and wireless service. Sprint, which has resold air time to cable companies in the past, would provide a nationwide wireless network.

A cable bid is unlikely given their track record though, said Larsen.

“Keep in mind, cable has flirted in and out of wireless for a long time,” he said. “They haven’t proved it to be a successful quad-play.”

D’Arcy Rudnay, a spokeswoman for Comcast, didn’t immediately return a call seeking comment.

Worth Waiting?

Sprint’s Hesse could decide to bulk up, rather than wait to be acquired, said Gamco’s Dluzhevskiy. Two possible targets are Leap Wireless International Inc. or MetroPCS Communications Inc., which use the same technology as Sprint, he said. The carriers offer prepaid mobile-phone service, which is seeing a surge in demand as consumers seek lower-priced monthly plans.

Sprint could also buy the shares in partner Clearwire Corp. it doesn’t already own, analysts said, though Sprint said in December it had no plans to do so. Clearwire’s stock had dropped 22 percent this year before today, pushing its market value down to $4 billion.

In any case, a potential acquirer such as CenturyLink would likely want to wait several quarters before making a move, Larsen said. The time would give Sprint the chance to finish making investments to upgrade its network and resolve other financial obligations, he said.

“You’d rather have Sprint spend the money to upgrade its network on its own nickel than yours,” Moffett said. “That creates another incentive for potential partners to wait and see if they can get a better deal in Sprint if it’s in significant distress a year or so down the road.”