The two companies’ boards have unanimously approved a merger that will create the third-largest US wireless operator and spin off Sprint’s local telco operations. The combined company will be led by a blended management team and will have a market cap of US$70B. The companies said they expect the deal to close in mid-2005, and the merger is expected to gain regulatory approval relatively easily.
The statement issued by the companies outlines the cost savings the combined company expects to realize, including reducing the number of cell sites and migrating Nextel’s backbone to Sprint’s infrastructure. The key technical element, however, could mean the end of iDEN. The combined company will leverage “Sprint’s current deployment of next-generation EV-DO technology to the combined customer base, including migration of Nextel’s push to talk services to CDMA.”
Current Nextel customers will eventually have to migrate to CDMA. That won’t happen until push-to-talk actually works in CDMA; until then Sprint Nextel will have to operate both networks. The cost of migrating Nextel’s 15+M subscribers will not be insubstantial once the PTT CDMA does become available, and the cost of operating overlapping footprints could cut into the expected savings.
I still think that the culture and management differences between the companies are significant and must be considered. The integration of these two companies will be much more difficult than Cingular-ATTWS, regardless of how upbeat Gary Forsee and Tim Donohue are.
Other questions arise, too. With its largest iDEN customer going away, what will Motorola do about the technology? What will happen to Nextel’s international business, which is all based on iDEN? They’re orphans now. And what will become of Flarion, the suppliers of Nextel’s broadband trial network? Yes, they have deals with other cellular operators in Europe and Japan, but Nextel was a huge fish (not to mention reference customer.)
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