Nextel To Be Bought Out By Sprint..Phone And Service Changes

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Rumor is that this will be announced early this week, and the media is reporting that we, the Nextel customers, would possibly have to transisition to new phones that are compatible with the Sprint Network and Nextel Network.

Sprint, Nextel Reportedly to Merge  

Sat Dec 11, 5:53 PM ET   Business - AP  

 

By BRUCE MEYERSON, AP Business Writer  

NEW YORK - Wall Street was abuzz over a potential merger between Sprint and Nextel, though the companies declined to comment on a slew of news reports that they are negotiating to combine to create a celluar provider that would almost rival Cingular Wireless and Verizon Wireless in size.  

Numerous research analysts on Friday issued positive assessments of the potential combination of the nation's third and fifth largest cellular carriers, reports of which first sprang up the day before.  

The Wall Street Journal reported Friday afternoon that Sprint Corp. and Nextel Communications Inc. have tentatively agreed to a deal in which Nextel shareholders would be paid the equivalent of 1.3 shares of Sprint stock plus some cash.  

As part of the deal, the combined company would spin off Sprint's local telephone business, the Journal said, citing an unidentified person familiar the matter. In addition, the Journal also said Sprint chief executive Gary Forsee would be CEO of the merged company, which will be called Sprint-Nextel, while Nexel CEO Timothy Donahue would serve as chairman.  

The New York Times, meanwhile, citing executives involved in the talks whom it did not identify, reported Friday that in reaction to the news, Verizon Wireless held internal discussions to contemplate an offer to buy Sprint. Verizon Wireless declined comment on the reports as well.  

Shares of both companies bobbed higher late Friday after pulling back in regular trading.  

Sprint's shares, which jumped 8 percent Thursday, rose 31 cents to $24.45 in extended trading after losing 14 cents in the regular session on the New York Stock Exchange (news - web sites). Nextel, which gained 7 percent on Thursday, rose 29 cents to $30.05 in extended trading after dipping 5 cents in regular Nasdaq trading.  

The potential appeal of a merger is apparent for both companies.  

Sprint's customer base is largely consumer, while Nextel's is dominated by business users who tend to spend far more on their monthly bills.  

Nextel — the fifth largest wireless company and the only national cellular provider that's an independent entity — is especially popular among mobile professionals and dispersed groups of workers who use the walkie-talkie feature on Nextel's phones to keep in constant contact.  

A merger of those operations would make the combined company a more potent rival to Cingular Wireless and Verizon Wireless by enabling the new entity to pool resources such as network capacity and cut redundant costs such as dual customer care systems and staff.  

Sprint's wireless Internet service, which it is upgrading to offer the same speeds as Verizon Wireless, would fill a major gap in the products Nextel can offer its valuable base of business users.  

Together, the companies would have 40 million users on their wireless network, though not all of them would be direct customers.  

Word of the potential deal comes less than two months after Cingular, a joint venture between SBC Communications Inc. and BellSouth Corp., completed its acquisition of AT&T Wireless to become the nation's biggest cell company with 47.3 million customers.  

One obstacle to a Sprint-Nextel deal might be technology since the companies use two different wireless platforms. By contrast, a combination between Sprint and Verizon Wireless might be easier because the two companies use the same wireless technology.  

Verizon Wireless, a partnership between Verizon Communications Inc. and Vodafone Group PLC, is the second largest with about 42 million subscribers.  

   

 

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Motorola Inc. fears it stands to lose from Sprint-Nextel merger

 

 

NEW YORK (AP) - Merger talks between wireless carriers Sprint Corp. and Nextel Communications Inc. aren't sounding very jolly to one equipment supplier: Motorola Inc.  

For years, the Schaumburg, Ill., provider of wireless products and infrastructure equipment has enjoyed an almost exclusive relationship with Nextel - supplying networking equipment and handsets to the wireless carrier. That advantageous agreement would end if Nextel joins forces with Sprint, industry experts say.  

By contrast, a merger would likely provide a boost to Sprint's suppliers: Qualcomm Inc., Lucent Technologies Inc., Nortel Networks Corp. and handset makers such as Samsung, Audiovox Corp. and others.  

The cause for the unequal distribution is a likely technology switch for Nextel, the smallest of the national wireless carriers. The Reston, Va., company has been something of a technology maverick, using a unique IDEN standard for its network and proprietary "push to talk" service. Sprint, on the other hand, has been running its network on CDMA - the same standard that Verizon Wireless uses.  

In order for the two companies' networks to work with one another, it would be easier for Nextel to switch to CDMA rather than the other way around, experts said. Sprint a has large nationwide network that would cost a lot to convert or rebuild.  

A Sprint conversion would be like "somebody wearing too many colours . . . too many technologies are not a good thing," said Rick Black, an analyst at Blaylock & Partners.  

Adding to the likelihood that Nextel will convert to CDMA is the fact that the company has already been looking into switching its platform technology. Nextel has been testing - with Motorola - a new wireless standard based on CDMA. The company has also been testing a unique technology, called OFDM, with New Jersey-based startup Flarion Technologies.  

"Obviously, there is still lots of uncertainty about how they will go through consolidation," said Bill Choi, said an analyst at Kaufman Brothers. A Nextel CDMA conversion would provide a windfall to whatever company gets to supply the technology - whether that's Motorola, Lucent, Nortel or whoever.  

An area with more certain impact for suppliers if Sprint and Nextel merge is handsets. Motorola is currently the sole handset provider to Nextel - and the handsets it does sell to the carrier are also its most profitable. Sprint buys phones from a variety of makers including Motorola, but also Samsung, Audiovox Corp. and others.  

Motorola will likely "wrangle themselves good market share" with a combined company, but it wouldn't be the same kind of advantage it's seen in the past, Choi said. Meanwhile, a merger means that Sprint's phone providers would be able to get business from a customer who was previously off-limits.  

But the biggest winner of the combination would be Qualcomm, which already licenses and makes chips using CDMA technology to Sprint. Qualcomm has also been working with Nextel for the past two years on developing a new push-to-talk technology, QChat, that can work on a CDMA platform.  

A merger would likely mean that Qualcomm "could collect royalties on additional CDMA handset sales and sell most of the chipsets for handset sales," Wojtek Uzdelewicz, a Bear Stearns analyst, wrote in a note.