Shares of Sprint Corp. (FON) and Nextel Communications Inc. (NXTL) jumped again on Friday as the telephone companies continued negotiations on a merger that would combine the No. 3 and No. 5 U.S. wireless service carriers.

The companies, which have held on-again, off-again talks over the past year, had renewed negotiations in recent days for an all-stock deal that would create a wireless company with about 39 million customers, sources familiar with the situation have said.

Shares of Sprint gained 97 cents, or 4 percent, to $25.25 on the New York Stock Exchange (search), building on an 8 percent gain seen on Thursday. Nextel's stock added 19 cents, or less than 1 percent, to $30.

Analysts said a merger would face several hurdles due to the incompatible wireless technologies used in their networks. But the companies still would benefit by gaining a broader customer base.

Nextel currently caters to high-paying corporate customers with its walkie-talkie-type telephones, while Sprint has targeted more mass market customers such as families and teenagers.

A merger would continue the long-awaited consolidation in the fiercely competitive U.S. wireless industry. Cingular Wireless kicked off the year with a bidding war for AT&T Wireless Services Inc. (AWE), which it bought for $41 billion. But there are still five large national wireless companies and several regional players.

Based on Thursday's closing share prices Sprint has a market capitalization of more than $34 billion and Nextel's capitalization is about $33 billion.