Tech sector geeks: is the proposed Nextel/Sprint merger a good thing? - Page 2

JimNasium · 12-10-2004, 08:04 AM

I'm a Sprint PCS customer but don't know enough about such things to make an informed opinion.

Story

December 10, 2004
Nextel Said to Be in Talks With Sprint
By ANDREW ROSS SORKIN and KEN BELSON

Nextel Communications is in advanced talks to merge with the Sprint Corporation, according to executives involved in the negotiations. The deal would form the third largest cellphone company in the nation, with 39 million wireless subscribers.

A deal could be reached as early as next week if the talks continue apace. In the meantime, the talks may bring to the game a third player, Verizon Wireless, which held several internal conference calls yesterday to discuss the possibility of making a run at Sprint, executives close to Verizon Wireless said.

Whatever the outcome, the industry appears ready to shrink once again, just six weeks after Cingular's acquisition of AT&T Wireless formed the largest mobile phone provider in the country with 46 million subscribers, surpassing Verizon Wireless with 42 million. The talks between Sprint, currently No. 3 in the market, and Nextel, No. 5, are also in part a response to Cingular's move, which forced other rivals to reconsider their competitive positions.

A merger of Sprint, which provides wireless service and traditional fixed-line service, and Nextel, best known for its push-to-talk walkie-talkie feature and loyal business customers, would marry two very different businesses and an assortment of overlapping and conflicting technologies.

Executives close to the Nextel-Sprint negotiations say the talks are at a particularly delicate point and may well collapse. The negotiations took on a sense of urgency in recent weeks because the market valuations of the companies had become more aligned - Nextel and Sprint had each been worth about $31 billion - allowing for the possibility that the companies could call the deal a merger of equals and take advantage of certain tax efficiencies.

But yesterday, as shares of Nextel and Sprint rose significantly after the negotiations were reported on CNBC, the executives said that they had begun to worry that the talks might fall apart because Nextel's market value was now about $32 billion and Sprint's had jumped to $36 billion. Shares of Nextel, which rose 6.6 percent, closed at $29.81. Shares of Sprint rose 7.9 percent, closing at $24.28.

When comparing wireless units, Nextel is the more valuable carrier. Though it has eight million fewer subscribers than Sprint, Nextel's customers pay nearly 10 percent more each month. Nextel's customer turnover rate - a crucial industry gauge - is half that of Sprint's. Nextel is also more profitable than Sprint. Almost one-quarter of Sprint's 23 million customers come from wholesale agreements with resellers like Virgin Wireless, and more than half of Sprint's revenue still comes from its shrinking fixed-line services.

The merger talks, which have been on and off for years, resumed in earnest last month after federal regulators moved closer to resolving the thorny problem of Nextel's radio spectrum, some of which overlaps with airwaves used by public service agencies, the executives said.

The Federal Communications Commission said that it wanted to give Nextel 10 megahertz of valuable 1.9-gigahertz spectrum in return for abandoning other spectrum it holds. Nextel will also have to pay several billion dollars to help public agencies take over its older spectrum. The offer, which Nextel has not yet approved, lifted a cloud of uncertainty which had hung over the company.

"It's no coincidence that things are heating up now that spectrum swap is getting done," said Jonathan Schildkraut, an analyst at SG Cowen & Company. "No one wanted to inherit the uncertainty."

Nextel has been an unusual player in the wireless phone industry. Unlike the other major wireless companies, it has built its network using 700-, 800- and 900-megahertz radio spectrum. For the most part, the rest of the industry, including Sprint, uses 1.9-gigahertz radio spectrum. That difference has forced Nextel to rely on its own network technology, which is not used by its competitors. Its technology is less able to provide high-speed data services that are seen as the future of the industry.

As Nextel moves into the 1.9-gigahertz spectrum, it will need to upgrade its network; in the event of a merger with Sprint, that technology would need to be compatible with Sprint's.

Roger Entner, a telecommunications industry analyst with the Yankee Group, a market research firm, said Nextel, if it merged with Sprint, "would not have to build that network all over again." Moreover, he argued, the two companies have complementary customer bases, because Sprint is stronger in the consumer market and Nextel is the best in the industry at serving businesses. "Sprint has cracked the code reasonably well on consumers and Nextel on business," he said, adding that the idea the two companies would merge is "a plausible story."

Still, a deal would have to overcome enormous hurdles. The combined company would most likely have to spin off or sell Sprint's traditional landline business, a potentially complicated process of breaking off pieces of the company. The combined company would also have to develop more wireless phones that work on both networks.

Matt Richtel, in San Francisco, contributed reporting for this article.

beavis · 12-10-2004, 10:17 AM

Quote:

Originally Posted by Cochise

That was the main thing that I hated, you couldn't believe anything you heard from above. There were emails coming out all the time about how they weren't planning widespead outsourcing, or how they were going to reorganize but didn't anticipate any cuts, or something like that, but deep down you knew they would fire you 5 minutes ago if they thought it would save them a nickel.

This was my favorite. The CIO once tried to tell us that they had only laid off 6 people. If that was the case, then I knew all of them.

Eleazar · 12-10-2004, 10:18 AM

Quote:

Originally Posted by JimNasium

You obviously have never driven rural Missouri then. If I get off of a major thouroughfare I'm going to be either roaming or without a signal. Analog roam = instant battery death.

No, I don't go into really rural areas too much. Most of my time is in the KC area, but I have been to northwestern and northeastern missouri a few times without trouble that I can recall.

beavis · 12-10-2004, 10:21 AM

Quote:

Originally Posted by JimNasium

You obviously have never driven rural Missouri then. If I get off of a major thouroughfare I'm going to be either roaming or without a signal. Analog roam = instant battery death.

Yes, most of Sprint's coverage is along major interstates and metropolitan areas, but they should have told you that when you signed up.

Analog roam is expensive as hell too.

JimNasium · 12-10-2004, 10:23 AM

Quote:

Originally Posted by beavis

Yes, most of Sprint's coverage is along major interstates and metropolitan areas, but they should have told you that when you signed up.

Analog roam is expensive as hell too.

I'm sure it's in the fine print somewhere. It's usually not an issue unless we have an issue in the sticks or when I'm driving between Springfield and Jeff City. There are numerous deadzones on that trip.

|Zach| · 12-10-2004, 10:25 AM

I have used Sprint for a long time. Most of my troubles come from problems with the physical phones. I am going to try and get a new one for X-mas so we will see how that goes.

Their coverage has been pretty good IMO...no problems in Springfield, KC, or east of KC. When I am driving from Springtown to KC there are some area where I lose it for a while but its not to big of deal to me.

|Zach| · 12-10-2004, 10:28 AM

Quote:

Originally Posted by JimNasium

I'm sure it's in the fine print somewhere. It's usually not an issue unless we have an issue in the sticks or when I'm driving between Springfield and Jeff City. There are numerous deadzones on that trip.

Jim, if you let me sew this to your head you won't have anymore deadzone problems.

**BigRedChief** · 12-10-2004, 10:37 AM

you guys are all talking aboiut phone issues.

What about the new arena? What happens to it?

What about if Sprint leaves? Who buys the season tickets? What happens to the KC economy? Can we support the Chiefs if Sprint leaves?

**jAZ** · 12-10-2004, 10:42 AM

T-Mobile.

beavis · 12-10-2004, 11:16 AM

Quote:

Originally Posted by JimNasium

I'm sure it's in the fine print somewhere. It's usually not an issue unless we have an issue in the sticks or when I'm driving between Springfield and Jeff City. There are numerous deadzones on that trip.

They should have given you a map showing you where they had coverage.

beavis · 12-10-2004, 11:18 AM

Quote:

Originally Posted by ZachKC

I have used Sprint for a long time. Most of my troubles come from problems with the physical phones. I am going to try and get a new one for X-mas so we will see how that goes.

Their coverage has been pretty good IMO...no problems in Springfield, KC, or east of KC. When I am driving from Springtown to KC there are some area where I lose it for a while but its not to big of deal to me.

I'm not realy fond of their phones either. They seem to wear out quickly. Of course I do use the hell out of mine. I got a new one less than six months ago, and already some of the buttons don't work. That's more of a knock on Samsung than Sprint though.

beavis · 12-10-2004, 11:20 AM

Quote:

Originally Posted by BigRedChief

you guys are all talking aboiut phone issues.

What about the new arena? What happens to it?

What about if Sprint leaves? Who buys the season tickets? What happens to the KC economy? Can we support the Chiefs if Sprint leaves?

I'm not sure about the the arena, that's a good question. I don't Sprint will be "leaving" though. I would think that the hq of the new company would still be in OP.

I doubt the percentage of season ticket holders that work for Sprint is high enough to have that big of an impact. Even if they all did get laid off.

**BigRedChief** · 12-10-2004, 11:33 AM

Quote:

Originally Posted by beavis

I'm not sure about the the arena, that's a good question. I don't Sprint will be "leaving" though. I would think that the hq of the new company would still be in OP.

I doubt the percentage of season ticket holders that work for Sprint is high enough to have that big of an impact. Even if they all did get laid off.

Sprint is the engine that powers the KC economy. We are not just talking about 35k losing their jobs we are talking about the other jobs being lost where those 35 k spend their sprint money. All the local companies that supply sprint with the supplies it needs. Sprint leaving would devestate the KC economy.

HC_Chief · 12-10-2004, 11:48 AM

Another company/companies would fill the void.

Short term, it would have a negative impact. Long term, nah.

**morphius** · 12-10-2004, 12:00 PM

Quote:

Originally Posted by HC_Chief

Another company/companies would fill the void.

Short term, it would have a negative impact. Long term, nah.

Yeah, just like when small towns lost their manufacturing plants and turned into ghost towns. If you hadn't been paying attention, KC keeps dropping lower and lower in everything the way I see it.

HC_Chief · 12-10-2004, 12:03 PM

Yeah, Sprint leaving KC would also lead to Block, HNTB, Bibb & Associates, and a host of other headquartered Fortune 500/1000 companies leaving.

Or did I just forget to put on my 'drama queen' undies today?

12-10-2004, 08:04 AM
JimNasium Voodoo Chile Join Date: Jan 2001 Location: At the crossroad Casino cash: $2913902	Tech sector geeks: is the proposed Nextel/Sprint merger a good thing? I'm a Sprint PCS customer but don't know enough about such things to make an informed opinion. Story December 10, 2004 Nextel Said to Be in Talks With Sprint By ANDREW ROSS SORKIN and KEN BELSON Nextel Communications is in advanced talks to merge with the Sprint Corporation, according to executives involved in the negotiations. The deal would form the third largest cellphone company in the nation, with 39 million wireless subscribers. A deal could be reached as early as next week if the talks continue apace. In the meantime, the talks may bring to the game a third player, Verizon Wireless, which held several internal conference calls yesterday to discuss the possibility of making a run at Sprint, executives close to Verizon Wireless said. Whatever the outcome, the industry appears ready to shrink once again, just six weeks after Cingular's acquisition of AT&T Wireless formed the largest mobile phone provider in the country with 46 million subscribers, surpassing Verizon Wireless with 42 million. The talks between Sprint, currently No. 3 in the market, and Nextel, No. 5, are also in part a response to Cingular's move, which forced other rivals to reconsider their competitive positions. A merger of Sprint, which provides wireless service and traditional fixed-line service, and Nextel, best known for its push-to-talk walkie-talkie feature and loyal business customers, would marry two very different businesses and an assortment of overlapping and conflicting technologies. Executives close to the Nextel-Sprint negotiations say the talks are at a particularly delicate point and may well collapse. The negotiations took on a sense of urgency in recent weeks because the market valuations of the companies had become more aligned - Nextel and Sprint had each been worth about $31 billion - allowing for the possibility that the companies could call the deal a merger of equals and take advantage of certain tax efficiencies. But yesterday, as shares of Nextel and Sprint rose significantly after the negotiations were reported on CNBC, the executives said that they had begun to worry that the talks might fall apart because Nextel's market value was now about $32 billion and Sprint's had jumped to $36 billion. Shares of Nextel, which rose 6.6 percent, closed at $29.81. Shares of Sprint rose 7.9 percent, closing at $24.28. When comparing wireless units, Nextel is the more valuable carrier. Though it has eight million fewer subscribers than Sprint, Nextel's customers pay nearly 10 percent more each month. Nextel's customer turnover rate - a crucial industry gauge - is half that of Sprint's. Nextel is also more profitable than Sprint. Almost one-quarter of Sprint's 23 million customers come from wholesale agreements with resellers like Virgin Wireless, and more than half of Sprint's revenue still comes from its shrinking fixed-line services. The merger talks, which have been on and off for years, resumed in earnest last month after federal regulators moved closer to resolving the thorny problem of Nextel's radio spectrum, some of which overlaps with airwaves used by public service agencies, the executives said. The Federal Communications Commission said that it wanted to give Nextel 10 megahertz of valuable 1.9-gigahertz spectrum in return for abandoning other spectrum it holds. Nextel will also have to pay several billion dollars to help public agencies take over its older spectrum. The offer, which Nextel has not yet approved, lifted a cloud of uncertainty which had hung over the company. "It's no coincidence that things are heating up now that spectrum swap is getting done," said Jonathan Schildkraut, an analyst at SG Cowen & Company. "No one wanted to inherit the uncertainty." Nextel has been an unusual player in the wireless phone industry. Unlike the other major wireless companies, it has built its network using 700-, 800- and 900-megahertz radio spectrum. For the most part, the rest of the industry, including Sprint, uses 1.9-gigahertz radio spectrum. That difference has forced Nextel to rely on its own network technology, which is not used by its competitors. Its technology is less able to provide high-speed data services that are seen as the future of the industry. As Nextel moves into the 1.9-gigahertz spectrum, it will need to upgrade its network; in the event of a merger with Sprint, that technology would need to be compatible with Sprint's. Roger Entner, a telecommunications industry analyst with the Yankee Group, a market research firm, said Nextel, if it merged with Sprint, "would not have to build that network all over again." Moreover, he argued, the two companies have complementary customer bases, because Sprint is stronger in the consumer market and Nextel is the best in the industry at serving businesses. "Sprint has cracked the code reasonably well on consumers and Nextel on business," he said, adding that the idea the two companies would merge is "a plausible story." Still, a deal would have to overcome enormous hurdles. The combined company would most likely have to spin off or sell Sprint's traditional landline business, a potentially complicated process of breaking off pieces of the company. The combined company would also have to develop more wireless phones that work on both networks. Matt Richtel, in San Francisco, contributed reporting for this article.
Posts: 6,875

12-10-2004, 10:25 AM	#20
\|Zach\| For The Glory Of The City Join Date: Sep 2002 Location: Kansas City Casino cash: $5326768	I have used Sprint for a long time. Most of my troubles come from problems with the physical phones. I am going to try and get a new one for X-mas so we will see how that goes. Their coverage has been pretty good IMO...no problems in Springfield, KC, or east of KC. When I am driving from Springtown to KC there are some area where I lose it for a while but its not to big of deal to me.
Posts: 53,435

12-10-2004, 10:37 AM	#22
BigRedChief Has a particular set of skills Join Date: Dec 2003 Location: On the water Casino cash: $3149627 VARSITY	you guys are all talking aboiut phone issues. What about the new arena? What happens to it? What about if Sprint leaves? Who buys the season tickets? What happens to the KC economy? Can we support the Chiefs if Sprint leaves? __________________ Fear leads to anger, anger leads to hate, hate leads to suffering. -YODA
Posts: 79,013

12-10-2004, 10:42 AM	#23
jAZ Supporter Join Date: Apr 2001 Location: Tucson, AZ Casino cash: $9847493	T-Mobile.
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12-10-2004, 11:48 AM	#28
HC_Chief That's just f***in' stupid Join Date: Aug 2000 Location: suburbia Casino cash: $3687107	Another company/companies would fill the void. Short term, it would have a negative impact. Long term, nah. __________________ "Gentlemen, you can't fight in here, this is the war room!"
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12-10-2004, 12:03 PM	#30
HC_Chief That's just f***in' stupid Join Date: Aug 2000 Location: suburbia Casino cash: $3687107	Yeah, Sprint leaving KC would also lead to Block, HNTB, Bibb & Associates, and a host of other headquartered Fortune 500/1000 companies leaving. Or did I just forget to put on my 'drama queen' undies today? __________________ "Gentlemen, you can't fight in here, this is the war room!"
Posts: 12,355