The head of No. 3 U.S. mobile service Sprint Nextel Corp said on Thursday that it is fair for the U.S. government to ask whether handset exclusivity deals should have time limits.

Sprint Chief Executive Dan Hesse said exclusive carrier deals with handset vendors are important for promoting innovation in the industry. He was responding to a question about a U.S. regulatory probe into such deals at a conference.

The legitimate question is how long the exclusivity periods need to be. It's a fair question, Hesse told the audience at the Goldman Sachs Communacopia conference.

Hesse repeated Sprint's target of losing fewer postpaid monthly bill paying customers this year than last year.

He declined to comment on recent speculation that Deutsche Telekom could make a bid for Sprint.

Asked on the sidelines of the conference whether there should be more consolidation in the hugely competitive U.S. wireless market, Hesse told reporters I don't know if its going to happen or if it's necessary. It's a healthy, growing industry with growth potential.

(Reporting by Sinead Carew, editing by Dave Zimmerman)