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Sprint/Nextel Match Continues US Wireless Carrier Consolidation

Today’s talk is about merger discussions betweeen Sprint and Nextel. The Feature has an excellent rundown with links to background information and analysis. US carrier T-Mobile, a unit of Deutsche Telekom, is definitely left standing alone. With the backing of their corporate parent and their strength internationally (67 million worldwide, 13 million in the US), they are not out of the running.

The Wall Street Journal also covers the story and has this to add:

Discussions between Sprint and Nextel are ongoing, these people say. There’s no certainty a deal is completed, they add, and like all discussions they could fall apart over issues both large and small. Verizon Wireless could also enter the fray. The country’s second biggest wireless operator uses the same cellular technology as Sprint, and has long had a sporadic interest in the carrier.

In the deal there are significant technology hurdles in the combination for the short term. Nextel - The Journal notes - would need to issue new handsets to its 15.3 million customers to shift over to Sprint’s CDMA network. But this is looked at as a relatively small issue, as all mobile players are focused on the future and their investments in cellular broadband technology - an area where neither player has made investments and there are room for synergies. This move comes at a good time for Nextel since they are making a major shift themselves. Nextel is about to swap their 800MHz spectrum for 1900MHz - a move the FCC is pushing to get Nextel off public safety bands and eliminate interference. The deal is good for Nextel, in that they’re being offered a good chunk of the valuable 1900MHz spectrum. However, Nextel runs iDEN, which is a separate and incompatible system (other carriers use CDMA or GSM). This iDEN network is fundamental to their popular push-to-talk (PTT) service, which enables high performance walkie-talkie functionality. Nextel is and remains the leader in this space, precisely because other carriers have had trouble getting PTT working on CDMA or GSM networks. So unless there is or will be some development that ports iDEN to 1900MHz, this deal with the FCC will effectively eliminate whatever portion of Nextel’s PTT and cellular service that relied on 800MHz. Depending on how much spectrum Nextel has in the 900 and 1500 MHz bands, it’s possible that Nextel won’t have to abandon iDEN in all areas - but surely this will impact the level of service delivered.

The FCC transaction forces Nextel to do the same engineering work that other carriers have tried in supporting PTT via CDMA — something it’s prospective partner Sprint has been unable to do effectively (or at least effectively enough to spur customer adoption and usage). Perhaps teams from the two orgs, working together, can puzzle this out. But this merger defintely makes for less immediate gain for both parties.