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Sprint bid to acquire Nextel on tap
Stakes of 51 percent and 49 stake seen; a Verizon offer?
By CBS MarketWatch

http://cbs.marketwatch.com/news/story.asp?guid=%7B3EAAB40F%2D9BB2%2D4049%2D83BB%2DBE498FE9810A%7D&am...

WASHINGTON (CBS.MW) -- Sprint and Nextel Communications could unveil their $36 billion merger within a few days, but speculation has intensified about the emergence of a rival bid.

The combination would create a company with 39 million customers and around $30 billion in annual wireless revenue. This would put the pair behind Cingular, with 47 million subscribers, and Verizon Wireless, which has more than 40 million.

Yet some analysts question whether Sprint and Nextel could bridge a wide chasm between the technologies they use and the inbred cultures of each company.

Nextel, a free-wheeling industry maverick, uses a unique wireless technology incompatible with the CDMA standard used by Sprint, a more-traditional business organization.

"Nextel has a very different approach," said business consultant Larraine Segil of Vantage Partners.

Yet the two companies have been forced to consider a marriage to keep up with larger rivals Verizon (VZ: news, chart, profile) and Cingular, the latter recently having acquired AT&T Wireless in a blockbuster $41 billion deal.

Cingular is owned by BellSouth (BLS: news, chart, profile) and SBC Communications (SBC: news, chart, profile). Verizon is jointly operated by Verizon and U.K.-based Vodafone (VOD: news, chart, profile).

Urge to merge

Though it controls a lucrative niche among business customers, Nextel faces limited growth prospects in the future as that market becomes increasingly saturated and more competitive. The company is also considered a minor player in the consumer market.

Adding to Nextel's urgency is its planned transfer to another part of the wireless spectrum to avoid interference issues with public safety providers. That could cost $4 billion or higher.

In addition, Nextel might have to spend several billions more to upgrade the speed and capacity of its network, a decision that could prompt the company to junk its inferior Iden wireless technology in favor of the CDMA standard now used by Sprint. Nextel is the only wireless carrier that uses Iden.

By joining with Sprint, Nextel could save billions in expenses and obtain enough wireless spectrum to offer a variety of advanced wireless services. See earlier story.

For its part, Sprint would be incorporating the premier supplier of wireless service to mobile workers. Indeed, Nextel's success has given the carrier the highest monthly revenue per user in the industry.

The inclusion of Nextel would also give Sprint the broadest base of customers in the industry -- a carrier serving millions of consumers, as well as small, medium and large businesses.

If the deal is consummated, other players in the wireless industry are likely to feel the repercussions.

Motorola, for example, is the exclusive supplier of Nextel phones and could lose some sales. On Friday, Motorola stock (MOT: news, chart, profile) fell $1.38, or 7.8 percent. It was trading slightly higher after the opening bell Monday, up almost 3 percent at $16.74.

Qualcomm, which licenses the CDMA system used by Sprint, could be affected. Qualcomm stock (QCOM: news, chart, profile) fell 13 cents Friday to $43.30. It was also higher early Monday, up more than 1 percent at $43.85.