jack barse

The potential Sprint-Nextel merger, that is.

Considered from the business perspective, Sprint is a wireless company with decent spectrum, a mediocre network, a mediocre management team and a customer base dominated by consumers. They still are the third-largest long distance company in the US as well as an operator of a variety of local telco systems, mostly in rural areas (expect Orlando, if I recall correctly). Nextel is an excellently run company with a business customer base; they have a hodgepodge of spectrum (although that might change if they get their way with the FCC) but are burdened by a mediocre network with one cool feature (but built on a sole-sourced technology, iDEN).

On the technology side, Sprint has built out CDMA 1X-RTT, and just this week announced that they will spend $3B to deploy EV-DO for broader bandwidth data services. Nextel is completely iDEN for voice and low-speed data and is investigating Flarion’s OFDN system for higher speed data; Nextel has also been rumored to be looking at EV-DO.

So the rumored merger seems a mess to me. Nextel certainly won’t give up its PTT feature, at least in the near term. First, PTT is not close to being ready for CDMA and second, the cost of converting existing iDEN users to CDMA (or vice versa) would be enormous. That means the combined company would have to run two networks for the foreseeable future; no economies of scale there, except where the iDEN and CDMA base stations were colocated. The marketing groups would either have to coexist to keep their respective focuses or be combined and choose either business or consumers as the primary target; the same thing goes for the sales channels.

So where’s the logic? Sure, the combined company would be the 3rd largest US carrier in terms of subscribers and would have a fair amount of spectrum in aggregate. But the operational costs, not to mention the costs of combining the companies, would seem to overwhelm any advantages of scale the combined company might hope to have.