Sextel Take Three

I have taken a scorched earth philosophy to the big Sprint-Nextel merger and am trying to be as comprehensive as possible about this. I had some interesting email reactions to the merger, and there were others who sent me their thoughts. I have included some here, including a take that the merger could actually boost competition.

“Conventional wisdom on the Sprint-Nextel merger is that this will make the market less competitive,” says Nick Wray, Vice President of Strategic Sourcing for Control Point Solutions. “I believe this merger will actually make the enterprise market more competitive. This consolidation, particularly of the technologies, will create a true competitor for giants of the wireless industry like Verizon and Cingular. The resulting company would combine Sprint’s large corporate customer base and network and Nextel’s extremely loyal customer base.”

Merrill Lynch, on the other hand believes that big winner here is Qualcomm since CDMA is the technology of choice for the combined company. Finally, the operators are planning to launch PTT (push-to-talk) capability on their CDMA EV-DO network in 2008. “We think this essentially means that the 14mn strong subscriber base of iDEN will join the CDMA community,” Merrill analysts write. On the flip side, the iDEN gravy train is coming to an end for Motorola.

“The near-term implications of the merger on Motorola’s handset business will be quite limited. Sprint and Nextel announced they would ask Motorola to develop dual mode handsets and, in addition, the operators are planning to keep the iDEN network fully operational at least until 2007, rendering Motorola’s iDEN handset business viable for at least another 3 years. In the long term Motorola’s handset division could lose 7-8c of its profits due to Nextel’s migration to a new technology, the impact on near term performance is quite limited. On the positive side, we note that while Sprint currently does not buy handsets from Motorola, the merger with Nextel and the development of dual mode handsets could open this market and create new opportunities.” iDEN sales account for approximately 20% of division revenues but 25% of profits, reflecting higher margins given Motorola’s sole-vendor status at Nextel.

Other links.
* The New York Times
* The Daily Deal
* Gary Forsee, profile in The Kansas City Star
* Timothy M. Donahue profile in The Kansas City Star
* The San Jose Mercury News on tough integration challenges.
* Nextel Cup — but for how long? The New York Post