Did one of the nation’s biggest wireless carriers get carried away in a deal-gone-sour, sending its own shares and related exchange traded funds (ETFs) lower?

Sprint Nextel (S) took a hit the first day of the month, despite announcing that it had finalized a previously announced deal to combine its next-generation wireless broadband business with Clearwire, reports Olga Karif for BusinessWeek. This deal would ensure faster service for both carriers and save expenses while maximizing profits.

What’s the problem?

Despite receiving fund from backers such as Google, Intel, Comcast, and Time Warner Cable, totaling $3.2 billion, it may not be enough money. Clearwire expected to be able to offer its service to 120 million to 140 million people by the end of 2010. But the buildout plans assumed that, in late 2009 or in early 2010, Clearwire would be able to raise an additional $2 billion to $2.3 billion. The rollout schedule is cut back and the capital markets are virtually closed.

Nonetheless, Sprint is taking the brunt if this and the company does not have a feature product to keep them in the rankings with the likes of Apples’ iPhone deal with AT&T (T), and Verizons’ (VZ) Blackberry, associated with Research In Motion (RIM).

Without a major product sweeping the nation, is Sprint the bad apple in the bunch? Could be, but at least it’s not a huge component of any of these telecom ETFs:

• iShares Dow Jones U.S. Telecommunications (IYZ): down 47.4% year-to-date; Sprint 4.6%; AT&T 26.6%; Verizon 18.5%

• Merrill Lynch Telecom HOLDRs (TTH): down 38.8% year-to-date; AT&T 57.7%; Verizon 27.1%; Sprint 2.7%

• Merrill Lynch Wireless HOLDRs (WMH): down 52.1%; Verizon 12.8%; Research In Motion 15.7%; Sprint 3.1%

Tags: IYZ, Telecommunications, TTH, WMH

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