The agreement has been approved by the boards of directors but must also be approved by stockholders and regulatory authorities. In the meantime, markets have been following a flurry of speculation that Verizon Communications Inc., the nation's largest phone company and the second largest wireless company, could make its own last-minute bid for Sprint.

Under the merger announced today in New York City, Sprint chief executive Gary D. Forsee will take the top post as chief executive of the combined company and will move to the corporate headquarters, which will be in Reston. Nextel chief executive Timothy M. Donahue will be executive chairman.

Nextel executives also will fill some key positions, including chief financial officer, chief technology officer and chief of strategic planning. The merged company will have an operational headquarters in Overland Park, Kan., where Sprint is based.

About 2,500 of Nextel's 18,000 employees work in the Washington area.

Forsee, in a statement, said the merger "positions Sprint Nextel for greater success than either company could have achieved alone," combining Nextel's advanced profitability with Sprint's advanced wireless technology.

A statement this morning estimated that the merger would save about $12 billion as the two companies consolidate operations.

The combined Sprint Nextel will be the third-largest wireless firm, behind Cingular Wireless LLC and Verizon Wireless. Cingular, which acquired AT&T Wireless Services Inc. seven weeks ago, has about 47 million subscribers; Verizon Wireless has 42 million. The merged company is expected to spin off Sprint's local phone holdings in a transaction analysts said could bring in as much as $19 billion.

Sprint shares rose percent, to $, yesterday after the Wall Street Journal reported that Verizon might bid for Sprint. The increase slightly bolstered the value of the Sprint-Nextel merger. Nextel shares closed unchanged yesterday at $.

The report said Verizon had received approval to make a bid for Sprint from Vodafone Group PLC, the British telecommunications firm that holds a 45 percent stake in Verizon Wireless. Verizon declined to comment. Vodafone denied the report, saying it had not had talks with Verizon about acquiring Sprint. "We're very happy with our 45 percent stake in Verizon Wireless," spokesman Bobby Leach said.

Nonetheless, Wall Street buzzed yesterday with speculation about a possible move by Verizon. Analysts have disagreed about whether federal regulators would sign off on a Sprint-Verizon combination. Analysts at Goldman Sachs argued in a research note that at the very least, such scrutiny would slow a deal.

Others cited the experience of Cingular and AT&T as evidence that federal officials would not block such a merger. Any conditions imposed by regulators would be "minor," said Scott C. Cleland, chief executive of the District-based Precursor Group, an independent research firm specializing in telecommunications. "I would be very surprised if [a Verizon-Sprint deal] ran into significant trouble," he said. A Verizon-Sprint coupling "is compelling on multiple levels," Cleland said.

Blair Levin, an analyst with Legg Mason, estimated that if a Verizon-Sprint combination won approval, the new company would probably have to divest some of its wireless spectrum in New York, Los Angeles, Chicago, Philadelphia, the Washington area, Baltimore and Austin, among other markets.

Levin argued that while a merger offers the potential for significant synergies, Verizon does not need Sprint to grow. A "deal is unnecessary for Verizon's continued wireless success and would face significantly greater risk that the deal would be blocked by the government than the risk that a Sprint-Nextel deal would be blocked by the government," Levin wrote.

Analysts said that while a merger was not essential for Verizon, it was crucial for both Sprint and Nextel. Sprint is bigger but less profitable than Nextel and is eager to sign up Nextel's higher-paying business customers, who like the company's push-to-talk service, which instantly connects callers at the touch of a button.

If Nextel stood alone, it would need to build a new advanced wireless network, which could cost the company $2 billion to $3 billion. In a merger it could share the network that Sprint is already building at a similar cost.

The Sprint-Nextel deal was structured to give Sprint shareholders a slight majority, sources said, so that the Internal Revenue Service would treat the spinoff of the local phone lines as a tax-free transaction.

Staff writer Annys Shin contributed to this report. Ben White reported from New York.