Sprint Corp. and Nextel Communications Inc., No. 3 and No. 5 U.S. cell phone companies, may soon be expected to join their efforts in the mobile phone industry merging to create a company with 33 million customers and joined market value of about $35 billion.

Right now the two firms are in early-stage talks concerning the merger that could help Sprint get closer to the No.2 in the market Verizon Wireless with 42 million customers. The combined company could have as many as 39 million customers.

“Ultimately, you have to have scale to compete with Cingular and Verizon,” said John Krause, an Appleton, Wisconsin-based analyst at Thrivent Financial for Lutherans.

The deal could help both companies to slash costs by merging overlapping operations. The deal however could lead to some technological problems due to the incompatible wireless systems used in the companies’ networks.

The advantage for both companies will be the diversification of their customer base. At the moment, Nextel positions itself at the high end of the market, while Sprint is focused on the mass market including families and teenagers.

"We believe that a potential combination of Sprint and Nextel would make sense on a number of measures, including spectrum position, network technology upgrade path and the complementary nature of the two customer bases," Merrill Lynch analyst James Moynihan said in a research report.

Sprint Chairman and Chief Executive Gary Forsee is believed to become chief executive of the combined company, and Nextel Chief Executive Tim Donahue could make executive chairman, splitting the board of the directors between the two companies in even proportions.

Currently the two wireless giants are said to be discussing the deal where Sprint would pay 1.3 shares of Sprint stock for each share of Nextel, with the value of the offer coming up to $36.3 billion.