• E-mail this page
• |  Print this page
• | 
• | 
• | 

Deutsche Telekom Mulling Sprint Nextel Buy

Reports wafting over the Atlantic Ocean suggest that Deutsche Telekom -- parent company of T-Mobile USA -- is considering Sprint Nextel as a take-over target. And why not? Sprint's share price is below $10, and the euro continues to dominate the dollar. Sprint's spectrum alone is worth it. That would make T-Mobile + Sprint the largest wireless operator in the United States. But could it work without falling to pieces?

The sources familiar with the matter, cited by The Wall Street Journal, say that the talks are in the earliest stages. Deutsche Telekom could just as easily scrap the idea. Right now, buying up Sprint's stock would cost DT just $22 billion. There are big pros and cons.

Pros

Cheap spectrum. -- Rather than worrying about participating in an FCC auction, if DT buys Sprint, it will automatically inherit Sprint's largest asset, its vast spectrum holdings. Sprint owns spectrum in the 850-, 1,900-, and 2,500-megahertz bands.

Customers -- DT would buy into Sprint's 50+ million customers, making T-Mobile USA and Sprint an 82-million member mega network.

Enterprise Play -- T-Mobile USA isn't known for its enterprise focus. Sprint has an active enterprise customer base who use BlackBerrys and other smartphones to access their enterprise systems. T-Mobile dearly needs to be friendly to the enterprise. Enterprise customers spend big bucks every month to access the voice and data networks.

Cons

Network nightmare -- We all know how poorly Sprint has integrated its Nextel iDEN network into its CDMA network. How DT would merge the iDEN, CDMA, GSM, and WiMax networks into a cohesive, working system sounds like a logistical nightmare. DT would most likely kill off the iDEN network altogether (which is something Sprint probably should have done already).

Technology tangle -- On top of the different networks, you have completely different radio technologies involved on the phones themselves. Hybrid phones that can access both the GSM and CDMA networks would be one way to go, but in the end, with AT&T and Verizon both switching to GSM-based LTE in the coming years, CDMA seems to be a dead end.

WiMax Write Off -- DT would have to decide almost immediately what to do with Sprint's planned WiMax network. Should it keep the ball rolling, or switch 4G strategies altogether? This decision would have a serious impact on the financial stability of the company going forward.

These are just some of the issues DT's managers need to consider. Right now, sources suggest that any solid decision is weeks or months away.

« Yang's Words To Yahoo Troops | Main | 8 Trends In IT CIOs Can't Ignore »