Sprint & Nextel, despite all the rumors and innuendo is finally done; the two companies have announced a $35 billion merger of equals and are now trying to move forward through there is the threat of Verizon stepping in and busting their plans.
The market’s reaction to news of Verizon’s potential interest in Sprint has, ironically, made it easier for the Sprint-Nextel deal to occur, as Sprint’s rising share price increases the premium offered to Nextel shareholders. A Federal Communications Commission official said a Verizon bid for Sprint would “raise greater regulatory concerns” than a Nextel-Sprint combination, because of Verizon’s market share and land-line holdings. (Wall Street Journal)
“This merger positions Sprint Nextel for greater success than either company could have achieved alone,” said Gary Forsee, who will head up the new company. The two combined companies believe that they can save more than $12 billion in network synergies, including saving on network operation expenses. Nextel’s back haul operations will be moved over to Sprint’s long distance network. In addition, the companies will base their future on CDMA and EV-DO. It seems iDEN technology is finally done. The conference call however cannot mask serious difficulties with this deal, as out lined by Greg Gorbatenko of Marquis Investment Research.
The merger is not a puzzle piece fit. The same holds for the respective customer bases. Nextel users may feel a little jilted since the cult-like following is now mass market, losing the PTT focus. While some people see FON biz and NXTL biz mkts a good fit, the segment within those mkts are different. FON’s wireless/GMG is focused on high-end enterprise aristocrats, whereas the NXTL biz is more bourgeoisie. Similarly, the NXTL PTT advantage could get lost in integration since NXTL built its business around it whereas FON used an inferior PTT as a bell and whistle. Lastly, FON was really started to make strides wholesaling its business (LD/Wireless), this new merger could cloud vision as they potentially could puff out the chest and try to adopt the same focus as a Cingular or Verizon.
Though on the conference call, Tim Donahue assured that IDEN is going to be around till 2007, and Motorola will develop a dual-mode phone. In addition, he assured the investors that the combined company will ensure a smooth transition to the push-to-talk over 3G networks, for its current and future customers. Talking about the MVNO business, Forsee said that the enhanced network spectrum and capacity will make sure it can pursue further MVNO opportunities, especially with the cable companies.
Not so fast, says my most regular reader and voice of reason on this board, Charlie Sierra:
End result of this merger for MSOs, can be summed up by the tattoo the host of Discovery TV’s Monster Garage got on the palm of his hand one episode: “Pay up, Suckers”. MSO’s have no other potential partner than Sprint-Nextel, because the others or RBOCs, and T-Mobile already has spectrum problems, and allowing a reseller on now would just make that situation worse. So I want to be on the record, that Sprint-Nextel will extract from the MSO and hefty access fee of $1-3 billion upfront as a contribution to offset the tens of billions of dollars Nextel and Sprint have pumped into these networks. The MVNO gravytrain is over, its time to “Pay up, Suckers”.
* The Broadband Daily on the impact of wireless mega-mergers on T-Mobile USA
Previously on GigaOm