A future technology shift at Sprint Nextel could pave the way toward a merger between the third-and fourth-largest U.S. wireless companies, the Financial Times suggests in an article published Tuesday.
According to the FT report, Sprint Nextel CEO Dan Hesse told the news agency that he sees "logic" in a merger between Sprint and T-Mobile USA, if the two companies were using the same 4G technology. He declined to comment further on merger talks. And Deutsche Telekom CEO René Obermannhas ruled out any "multibillion" euro deals this year. Deutsche Telekom owns T-Mobile USA.
Sprint Nextel has partnered with Clearwire, which is currently building a nationwide 4G wireless network using a technology called WiMax. The network is now in 43 markets.
During his interview with the Financial Times, Hesse reaffirmed statements he made previously about Sprint possibly moving to a different 4G technology, known as LTE, or Long Term Evolution.
"We have the spectrum resources where we could add LTE, if we choose to do that, on top of the WiMax network," he told the Financial Times. "The beauty of having a lot of spectrum is, we have a lot of flexibility."
LTE is the fourth-generation technology that Verizon Wireless is using to build its new network. Verizon's network should go live in 25 to 30 markets by the end of the year, the company has said. Most GSM carriers around the world, including AT&T and T-Mobile USA, also plan to use LTE to build their next-generation wireless networks.
While WiMax is not expected to go away anytime soon, equipment vendors have focused more effort recently on developing LTE gear and products. So it makes sense for Sprint to keep its options open. But for now, WiMax is still much further along, in terms of product development.
As competition in the wireless market heats up, there has been speculation that Sprint and T-Mobile USA, which are considerably smaller than the two largest U.S. carriers, Verizon Wireless and AT&T, would join forces. In 2009, rumors surfaced that Deutsche Telekom was considering buying Sprint and merging the two U.S. operators. But Sprint and T-Mobile use different technologies.
Sprint uses CDMA and EV-DO for its 3G network. And T-Mobile uses GSM and HSPA for its 3G network. Merging the two networks would be costly and difficult, as Sprint's merger with Nextel in 2005 proved. Nextel used a technology called iDEN.
If Sprint and T-Mobile were each using LTE for their 4G networks, a merger might make more sense, the Financial Times reasoned in its article.
One problem is that even if Sprint deploys LTE, it will be far into the future, given the company's current investment in WiMax. And new networks take years to deploy fully. Secondly, T-Mobile isn't close to deploying 4G, either. The company is currently upgrading its 3G HSPA technology to the next generation, called HSPA+.
A much more likely scenario for these companies is to partner with one another. In this scenario, T-Mobile could use the Clearwire WiMax 4G network. But even this type of partnership is not something that is likely to happen anytime soon. T-Mobile is adamant that its HSPA+ technology will give it enough headroom to compete against 4G competitors. HSPA+ supports theoretical download speeds of 21 megabits per second, which puts it on par with current real-world WiMax speeds.