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Sprint and Nextel Communications have agreed to merge, the latest move in the consolidating U.S. mobile market.

The new company, to be called Sprint Nextel, will directly serve more than 35 million wireless subscribers. Another 5 million users will tap into the network through partnerships and affiliates.

Sprint's local telecommunications business will be spun off to shareholders after the merger.

"[The combined company] will be a dynamic next-generation communications company, the provider of choice for businesses, government and consumers, and the only U.S. primarily wireless investment opportunity," Gary Forsee, Sprint's chairman and CEO, said in a statement.

Forsee will become CEO of Sprint Nextel. Timothy M. Donahue, currently president and CEO of Nextel, will become chairman of the new company.

Sprint Nextel's executive headquarters will be in Reston, Va., and its operational headquarters in Overland Park, Kan. Its stock will be listed on the New York Stock Exchange.

Executives say the merger will create $12 billion in synergies, including cutting the number of cellular sites, switching Nextel long-haul traffic onto Sprint's IP network and trimming administrative costs. Layoffs were not addressed in the companies' announcement.

The merger comes nearly a year after Cingular Wireless -- the BellSouth and SBC joint venture -- and AT&T Wireless began merger discussions, which recently came to fruition after the Department of Justice approved the $41 billion deal.

The Cingular acquisition catapulted it past Verizon Wireless as the top mobile carrier in the United States.

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