Sprint CEO sees 'logic' in merger with T-Mobile
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.
Last month, Sprint Nextel launched its first 4G smartphone, the HTC Evo 4G. But component issues have caused nationwide shortages of the device at many Sprint stores and other retail locations.
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.
Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies. E-mail Maggie. 
WiMax is an interesting technology, but few devices exist - manufactures are not willing to invest into resources to support a single provider. Whoever builds the best LTE network will win businesses and consumers with smart phones. It is not hard to guess who is putting most investment into it.
Assuming Sprint does indeed opt to either switch to LTE (or at least deploy it alongside WiMax) and T-Mobile deploys LTE 4G networks, how will they handle the inevitable scenario of when a customer is in a region not covered by the LTE network? I see at least a few options (though I imagine I'm missing something):
* The customers would have to keep this in mind and either buy a CDMA or GSM phone that would work on the LTE network, or
* Sprint/T-Mobile would need to consolidate and choose one technology over the other, leaving existing customers using phones with the other technology having to upgrade or look elsewhere, or
* Sprint/T-Mobile would have to start requesting manufacturers ensure all bases are covered and develop phones that utilize radios that work for CDMA, GSM, *and* LTE.
No doubt there are a number of other scenarios and issues I'm not even thinking of...
Sprint/Verizon could work, technologically-speaking, but that would probably not pass antitrust muster at this point. I think we have enough consolidation in the cellular market at the top. Whereas some consolidation of the smaller providers (US Cellular, Cricket, MetroPCS, etc.) could be doable. All 3 of those carriers are using CDMA, so any of them could be potential Sprint merger partners, though I think the logical choice would be Sprint/US Cellular.
I wonder if a merger with T-Mobile would be a way to save Nextel?
I believe you misunderstood my statement because of my questionable phrasing. I meant to say that I stay with Sprint because other carriers (AT&T, Verizon) take advantage of their own market dominance to charge people higher prices. Sprint's Everything Plan is still unchallenged in terms of options and pricing. For $99 with AT&T or Verizon, you only get unlimited talk and text, where as Sprint will give you talk text, data and t.v..
In other words, Sprint has lower prices because they have to beg for business (and I do mean beg, since for the past four years, they have done nothing but lose subscribers, excluding the minimal gains to their Boost brand, which don't offset losses to their Sprint/Nextel brands). Verizon and AT&T have more popular phones and generally better coverage (Sprint's Everything Plan is essentially a deal with Verizon and AT&T to cover roaming through their towers). Because of this, they freely charge an average of $20-40 more for the same plan types that Sprint offers.
www.prepaid-wireless-guide.com
- by tenorlite August 5, 2010 10:51 AM PDT
- The Sprint and T-Mobile would be an interesting merger, as it coincides with Clearwire's announcement to start testing or developing LTE within the current network infrastructure. Sprint is a majority owner of Clearwire and so all these announcement between the two companies, Clearwire and Sprint, is starting make a whole lot of sense. The 4G technology is the key though that will clearly make the merger sensible and logical (as per Dan Hesse). Without 4G/LTE, the merger would not make any sense at all. If the the merger takes place, there would be growing pains at first. Once all the business and technology parts are synchronized, I think we are going to see a new Sprint or new T-Mobile on the rise.
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