Sprint Considering Sale, Spinoff of Cellular Unit : Telecom: Move follows purchase of PCS licenses. Simultaneous ownership may violate FCC rules.

CHICAGO — Sprint Corp. said Wednesday that it may sell all or part of its cellular telephone business--or spin it off to shareholders--to clear conflicts over ownership of licenses arising from the recent federal auction of radio frequencies.

“The board is studying various options as we seek the most effective marketing identity and technological infrastructure for our wireless businesses,” said William T. Esrey, Sprint’s chairman and chief executive.

Federal Communications Commission rules allow only limited ownership of cellular licenses in areas in which firms won licenses in March’s auction for a new breed of advanced mobile phone systems known as personal communications services.

Sprint’s PCS bids were made in a partnership with cable TV companies Tele-Communications Inc., Comcast Corp. and Cox Communications Inc.

The partnership won the rights to licenses covering a population of 182.4 million. The duplication of licenses covers only 1.7 million POPs, or potential customers in the market.

Westwood, Kan.-based Sprint said that in deciding whether to go ahead with the spinoff, it will weigh factors such as the effect on shares, the speed of the deal and strategic and tax implications.

“If taxes were the primary consideration in terms of shareholder value, a spinoff is more tax-efficient than the sale of assets, but this is one factor among many factors in our board’s analysis of our various options,” Sprint Chief Financial Officer Arthur Krause said.

Industry analysts agreed, saying the tax issue and shareholder value will probably triumph.

Sprint “could get around a big tax bite with a spinoff. I think it’s the way they’ll go, and it’s more beneficial to shareholders,” said Bill Deatheridge of S.G. Warburg.

Sprint said there are no assurances that it will execute any of the options under consideration other than to clear the licensing conflicts to comply with FCC rules.

The duplication of license interest occurred in Dallas; Des Moines, Iowa; Detroit, and Philadelphia.

FCC rules say PCS license winners are not allowed to hold more than a 20% stake in a cellular provider that serves 10% or more of the population in a given metropolitan trading area.

To clear conflicts, they can reduce their ownership below 20% or reduce population coverage to 10%.

If Sprint were to divest its ownership totally in these markets, and in certain other overlap markets and minority investments, it would represent an additional 6 million POPs.

Sprint said its board expects to reach a decision in a few weeks. The company hired Dillon, Read & Co. and Salomon Bros. to assist in the review.

Sprint’s stock closed up 25 cents at $33.875 in trading on the New York Stock Exchange after the announcement.

Chicago-based Sprint Cellular Co. is the nation’s eighth-largest cellular company, providing wireless voice and data service to nearly 1.2 million customers in 88 markets in 14 states.

Its majority and minority ownerships together represent proportionate market ownership interests of more than 20 million potential customers.

In the year ended March 31, Sprint Cellular’s operating revenue was $762 million, up 48% from a year ago. Operating income doubled to $104 million.