The Wall Street Journal is running a relatively short piece announcing that Sprint and Nextel have entered into advanced negotiations for a merger of equals between the two companies.
One exciting tidbit is that Reston, Virginia will be the headquarters for the merged corporation. Some good news for Northern Virginia which has been hard hit by the telecom industry collapse. At least some of the consolidation is sucking some jobs our way. Too bad for Kansas, I guess.
The new company is going to be based largely on wireless services. The rumor is that the merged company is going to spin off Sprint’s local services business, which should fetch some decent coinage. Maybe from the likes of Alltel or one of the RBOCs. I’m not sure where all Sprint have their local businesses.
A big question for me with this merger is on the wireless technology front. Sprint use CDMA and Nextel use iDEN. The latter is a proprietary, TDM-based wireless protocol which makes Nextel’s stand-out (and annoying) push-to-talk function work. The CDMA carriers Verizon Wireless and Sprint have made their own forays into the PTT arena with limited success. Nextel even ripped on Verizon Wireless for having long connect times for PTT. How will they consolidate these networks? How will the merged company continue to meet the expectations customers have for PTT responsiveness through the technology transfer? What manufacturers are going to be able to make equipment for the merged company? How does this impact Sprint’s recent announcement of approximately $3 billion in capital into their wireless infrastructure? Considering the technology hurdles these companies will have to overcome, how long before stockholders see the benefits of “synergy?”
Unlike the Cingular-AT&T Wireless merger, this is not a merger of similar technologies. I suspect that this merger is going to take much longer to deliver any value to shareholders. Considering the integration challenges of Cingular and AT&T Wireless that’s really saying a lot.
