Sprint, Nextel Agree To Merge - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

IoT
IoT
Infrastructure
News
12/15/2004
10:32 AM
50%
50%

Sprint, Nextel Agree To Merge

The deal, valued at $35 billion, will create a large wireless service provider to compete with wireless rivals Cingular and Verizon.

Sprint Corp. on Wednesday said it will merge with mobile phone company Nextel Communications in a deal valued at more than $35 billion. The move continues the consolidation of the wireless industry and creates a third competitor in the wireless-communications market.

The combination of Sprint, the nation's third-largest wireless carrier, and Nextel, the fifth largest, creates a company called Sprint Nextel that will be better positioned to compete with Cingular Wireless and Verizon Wireless, the industry's two largest wireless carriers. Sprint Nextel will have around 40 million subscribers. Cingular, the industry leader, has about 47 million subscribers.

The two companies had combined revenue of around $40 billion for the 12 months ending Sept. 30 and expect they will be able to cut around $12 billion in annual costs by combining operations.

"This merger positions Sprint Nextel for greater success than either company could have achieved alone," said Sprint chairman and CEO Gary Forsee in a statement. Forsee will be president and CEO of the merged company. "Together, we will be positioned to provide the high-value, integrated communications solutions customers increasingly demand."

"I'm shocked at how much Sprint paid for Nextel," says Suzzana Ellyn, a wireless industry analyst with research firm Current Analysis, noting that Cingular paid around $40 billion for the much larger AT&T Wireless in a deal completed earlier this year. "Sprint sees a huge amount of value in Nextel's position in the enterprise market."

Nextel has developed a strong position in the business market because of its "push-to-talk" feature, which offers capabilities similar to those provided by walkie-talkies to groups of subscribers. "Sprint has been trying to increase its share of the business market and Nextel should help it do that," Ellyn says. "They will help Sprint offer a more well-rounded package of services."

Sprint Nextel plans to spin off Sprint's local phone business into a separate company. Sprint has 7.7 million local-access lines in 18 states and reported revenue of more than $6 billion during the past year. It will be the largest non-Bell local phone company in the country.

The near-term benefits for customers may be limited since it will take time for the two companies to combine operations and standardize their wireless-infrastructure technologies. But Sprint Nextel will offer digital wireless services throughout the country and plans to deploy next-generation high-speed wireless-data services. Rivals Cingular and Verizon already have begun to deploy so-called third-generation wireless-data services.

In addition to its push-to-talk capabilities, Nextel also offers more location-based services than other wireless service providers. These will help Sprint Nextel differentiate itself in a competitive market where basic wireless voice services have become a commodity, forcing carriers to compete on price and buckets of minutes.

The merger of two of the leading wireless service providers may slow down that price competition, but it won't halt it, analyst Ellyn says: "This is still one of the most competitive industries around."

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
Commentary
AI Regulation: Has the Time Arrived?
John Edwards, Technology Journalist & Author,  2/24/2020
News
Fighting the Coronavirus with Analytics and GIS
Jessica Davis, Senior Editor, Enterprise Apps,  2/3/2020
Slideshows
IT Careers: 10 Job Skills in High Demand This Year
Cynthia Harvey, Freelance Journalist, InformationWeek,  2/3/2020
White Papers
Register for InformationWeek Newsletters
State of the Cloud
State of the Cloud
Cloud has drastically changed how IT organizations consume and deploy services in the digital age. This research report will delve into public, private and hybrid cloud adoption trends, with a special focus on infrastructure as a service and its role in the enterprise. Find out the challenges organizations are experiencing, and the technologies and strategies they are using to manage and mitigate those challenges today.
Video
Current Issue
IT Careers: Tech Drives Constant Change
Advances in information technology and management concepts mean that IT professionals must update their skill sets, even their career goals on an almost yearly basis. In this IT Trend Report, experts share advice on how IT pros can keep up with this every-changing job market. Read it today!
Slideshows
Flash Poll