February 10, 2005 12:03 PM PST
Sprint/Nextel merger favoring Qualcomm standard
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Mixed marriage for Sprint and Nextel technologiesDecember 15, 2004
A major question regarding Sprint's deal to buy Nextel for $35 billion has been which of the two incompatible cell phone networks will prevail. On Thursday, it appeared more than ever that the new cell phone powerhouse has a future dominated by Qualcomm's CDMA standard, which is at the heart of Sprint's current wireless network and the upgrade it has begun building.
Sprint has hinted since it announced the deal in December that Nextel's iDEN-based network will eventually be relegated to supporting just old Nextel customers. But on Thursday, executives told financial analysts that Sprint also wants to migrate all of its customers' voice traffic onto CDMA, leaving the iDEN network with even less to do.
By favoring CDMA, Sprint is dealing what could be a deadly blow to the struggling standard, which has found few takers outside of Nextel. It could also hurt the standard's maker, Motorola.
According to various research firms, investors are worried that a Sprint-Nextel merger risks 9 percent of sales and 13 percent of the income Motorola currently receives from Nextel. It is possible that Qualcomm "could collect royalties on additional CDMA handset sales and sell most of the chipsets for handset sales," according to Wojyek Uzdelewicz, a Bear Stearns analyst.
CDMA wins out, according to analysts, mainly because without much interest in iDEN, network equipment and handset makers haven't developed newer, faster and better generations of their products. CDMA's 20 percent market share drives ample research and development of new gear.
A Motorola spokeswoman said the company "remains committed to the ongoing development and deployment of next-generation iDEN technology and products."
The Sprint-Nextel merger is one of two major wireless couplings to rattle the industry. Late last year, Cingular Wireless completed its merger with AT&T Wireless, thus creating a new No. 1 cell phone operator in the United States.
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