Spint, Nextel agree to merger of equals - PBX Info :: Your Free PBX, PABX and Telephone Information Resource

sjforcum · 12-16-2004, 08:59 AM

Sprint, Nextel ink $35 billion deal
Merger would create third-largest wireless carrier in U.S.

MSNBC staff and news service reports
Updated: 2:04 p.m. ET Dec. 15, 2004

NEW YORK - In a deal that would create a wireless telephone giant with 35 million customers, Sprint Corp. has agreed to acquire Nextel Communications Inc. in a $35 billion deal, the two companies said Wednesday.

The transaction, which had been widely expected, would create a company called Sprint Nextel that would rank No. 3 in the industry with about $40 billion in combined annual revenue, trailing only Cingular Wireless and Verizon Wireless.

Sprint would get access to Nextel’s 15.3 million subscribers, many of whom are business customers, and Nextel would avoid a costly upgrade of its own network. The companies estimated the merger would save them $12 billion in operating costs and network upgrades.

The deal includes a hefty break-up fee of roughly $1 billion, which makes it more difficult for another suitor to emerge with a better offer to acquire either Sprint or Nextel.

The Wall Street Journal reported Tuesday that Verizon was interested in merging Sprint with the wireless service it runs as a joint venture with Vodafone Group PLC. Vodafone denied it had discussed the matter with Verizon.

The merger will attempt to smoothly combine two divergent wireless networks. Nextel has aimed its popular “push-to-talk” walkie-talkie service mostly at business consumers, who account for roughly three-fourths of its customer base. That ratio is flipped at Sprint, which has had a greater emphasis on retail customers and data services.

The combination comes as the cost of wireless calls continue to drop and the industry begins to look like the long-distance business looked five years ago: Three big competitors constantly undercutting each other’s prices.

After completion of the deal, which the companies described as a merger of equals, Sprint’s local telecommunications business would be spun off to the combined firm’s shareholders. The local business accounted for about $6 billion of annual revenues.

The company expects the local business to have roughly 22,000 employees and the combined wireless company to have about 55,000 employees.

But executives said some of those positions would be eliminated. “At the end of the day, it will be about rationalizing and downsizing,” Gary D. Forsee, Sprint’s chairman and chief executive said Wednesday.

Sprint Nextel will have its executive headquarters in Reston, Va., where Nextel is now based, and its operational headquarters in Overland Park, Kan., where Sprint has its headquarters.

Forsee will become president and CEO of Sprint Nextel, and Timothy M. Donahue, currently president and CEO of Nextel, will become chairman of the new company.

The new company’s board would consist of 12 members with six from each company.

“This merger positions Sprint Nextel for greater success than either company could have achieved alone,” Forsee said in a statement.

The deal is subject to approval by the Federal Communications Commission, which will take a "rigorous" look, agency Chairman Michael Powell said Wednesday.

“Whenever we sort of consolidate the market one fewer, we’re going to take a very, very hard and rigorous look at that,” Powell told reporters.

Powell said he received assurances from the companies that the combination would have no impact on the FCC’s proposal to swap airwaves with Nextel to solve interference problems with police, fire and rescue communications. Nextel has yet to agree to that plan.

Sprint currently ranks as the nation’s No. 3 wireless company as well as the third largest in long-distance service. Nextel ranks fifth in U.S. wireless service.

Nextel agreed last month to move its network to a more expensive band of broadcast spectrum because of fears of interference between its phones and emergency response radios.

Now, according to a press release from the companies, Sprint’s next-generation technology will be used for the combined network.

After the takeover, the three largest wireless companies will carry about 75 percent of traffic, according to telecom analyst Jeff Kagan.

At the top is Cingular Wireless, a joint venture between BellSouth Corp. and SBC Communications Inc. that recently completed the $41 billion acquisition of AT&T Wireless.

No. 2 Verizon Wireless is a joint venture owned by Verizon Communications Inc. and Vodafone Group PLC, the world’s largest mobile-phone operator.

Under terms of the deal, Sprint shareholders would get one share of the new company for each Sprint share while Nextel shareholders would get the equivalent of 1.3 Sprint Nextel shares for each of their shares, a small amount of that sum paid in cash.

At Wednesday’s rates, each Nextel share would be exchanged for 1.28 Sprint Nextel shares and 50 cents in cash.

The exact breakdown for Nextel shareholders will be determined later, but the cash payment won’t exceed $2.8 billion.

The Associated Press and Reuters contributed to this story.

Source : (Click Here)

sjforcum · 12-16-2004, 09:01 AM

One mobile company, two mobile standards
Sprint-Nextel merger must deal with incompatible technology

The Associated Press
Updated: 8:31 p.m. ET Dec. 15, 2004

SAN JOSE, Calif. - The proposed merger of Sprint Corp. and Nextel Communications Inc. could face a rocky start as the companies work to run and eventually merge two wireless technologies without breaking the bank or losing customers.

On the surface, it's as though a bride and groom decided to tie the knot even though they don't speak the same language. Though a happy, long-lasting marriage isn't out of the question, a considerable amount of effort is required.

Nextel was something of a loner in the wireless standards it used, and now its suitor will have to make adjustments beyond the usual merger challenges.

"A lot of us who watch the industry tended to feel it was unlikely (Nextel) would be able to hook up with a partner just because it seems ... the costs of uniting two networks built around very different technologies would be almost too high to pull off in any kind of reasonably efficient way," said Joseph Laszlo, a senior analyst at Jupiter Research.

Tale of two technologies
With Nextel, Sprint is acquiring 15.3 million subscribers and a network based on Motorola's Corp.'s Integrated Digital Enhanced Network, or iDEN, digital radio technology.

But iDEN doesn't work with the Code Division Multiple Access, or CDMA, the standard used by Sprint's 20.1 million existing subscribers.

For the combined Sprint Nextel to take full advantage of the merger, a lot of infrastructure -- the base stations and other equipment that carries calls -- would have to change. In addition, customers would have to get new phones.

Nextel and Sprint say they have a plan that won't be so disruptive. But it's also not cheap.

Once the merger is complete next year, the combined company will keep its iDEN network running "for some period of time," said Tim Donahue, Nextel's chief executive. But eventually all the infrastructure will be transitioned to CDMA.

It will require considerable effort and expense. For one, all the iDEN hardware will have to be updated. Any iDEN phones used by customers will have to be switched as well.

In the meantime, Motorola is expected to provide what's called a dual-mode phone capable of connecting to both the iDEN and CDMA networks.

It's a greater challenge than what faces Cingular Wireless LLC after its recent $41 billion purchase of AT&T Wireless. In that case, both companies used Global System for Mobile Communications, or GSM. Interoperability is possible through a software change.

Opportunity seen with new spectrum
But even though Sprint and Nextel are not compatible, said Bill Choi, senior analyst at Kaufman Bros. they could leapfrog the competition by moving to a more advanced wireless technology altogether.

After all, Nextel has had plans to make a switch from iDEN, which is not designed for high-speed data transfers increasingly demanded by consumers -- long before the merger was announced.

It was already working with Motorola to develop a CDMA-based wireless standard as well as other, more future-proof technologies.

Nextel was also so planning to shift its service to a different part of the spectrum so that that it didn't interfere with emergency response radios.

"By Sprint acquiring Nextel, they're going to get an additional spectrum," Choi said. "In that new spectrum, you can put in whatever you want."

But in the near-term, any cost savings from combining the companies may be lost as Sprint Nextel runs two separate networks, Timothy Horan, an analyst at CIBC World Markets, wrote in a research report.

And aside from the underlying wireless standards, Nextel's customer base tends to skew toward businesses. That presents yet another challenge for Sprint and its handset suppliers, who have been traditionally focused on consumers.

There's a significant risk if the new company's equipment isn't rugged enough or if customer service deteriorates, said Lance Wilson, director of wireless research at ABI Research.

"My greatest concern is: Will Sprint be able to retain the Nextel business customers? I don't think that's a given," he said.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Source : (Click Here)

sjforcum · 12-16-2004, 03:07 PM

As a Nextel user, I can't wait to gain access to the Sprint network with a dual band phone...of what is left in the industry, seems like a great pairing.

Thread Tools
Show Printable Version Email this Page
Display Modes
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)