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Investors Respond To Sprint-Nextel Merger Rumors
December 09, 2004 (4:39 PM EST)

http://www.techweb.com/wire/networking/55300815

By W. David Gardner, TechWeb News

Wall Street took a strong liking to reports that Nextel Communications and Sprint Corp. are talking merger: the stocks of both companies jumped more than 7 percent Thursday.
CNBC said the two companies are in "active and ongoing" discussions, referencing an earlier report in the Wall Street Journal that the two cell phone service providers have been discussing the possibility of merging.

A merger between the third largest cell phone provider (Sprint) and the fifth largest (Nextel) could represent an important step in the long-awaited consolidation in the cell phone industry that so far has been elusive. The current disappearance of AT&T Wireless into the maw of Cingular Wireless may be trumped by the reincarnation of a wireless operation by AT&T, which will use Sprint as reseller.

"Consolidation will be good for the end user and lead to better quality of service for subscribers," said Michael Voellinger, wireless vice president at Telwares. "There are two primary issues here, though " the migration path and the distinctly different cultures of Nextel and Sprint."

The migration path is paramount to Nextel, because it is being forced to upgrade from its existing hodge-podge of public safety channels to different radio bands. As it looks to the future it has been examining Qualcomm Inc.'s CDMA technology " already in place at Sprint " and testing Flarion Technologies' Flash-OFDM network. In noting that Nextel has been testing the Flarion service in North Carolina, Voellinger said those tests have been successful. CDMA has already been successfully rolled out in numerous networks throughout the world.

Fitting somewhere, too, in the Sprint-Nextel equation is AT&T, which is planning to get back into the wireless arena now that its former cell phone operation " AT&T Wireless " has been swallowed up by Cingular. AT&T has said it is planning an ambitious wireless service rollout by the end of the year. AT&T has a non-exclusive five-year agreement with Sprint as its delivery vehicle. AT&T plans to offer its own content and applications including handsets, operator assistance, 411 information service, and customer care. The firm has suggested it could offer VoIP calling over Wi-Fi networks, too.

Voellinger said the trend in cell phone service will be towards providing content and services but he doesn't expect to see prices drop much more. "Voice and e-mail are still the killer applications," he said.

Another advantage of a merger for Nextel is that it would soften the sharp attacks from Verizon Wireless and Cingular " the latter is a combo of BellSouth Corp., and SBC Communications " which have complained that the federal government is preparing to grant valuable spectrum to Nextel at below-market prices. In recent weeks Verizon Wireless has softened its attacks on Nextel, but Cingular has grabbed the baton and lashed out at Nextel.

Sprint and Nextel declined to comment on the merger reports.