Sprint and T-Mobile?
Deutsche Telekom is reportedly mulling a takeover of Sprint Nextel. Der Spiegel says that this would enable the combined Sprint Nextel and T-Mobile the ability to compete more effectively against Verizon and AT&T. Isn’t combining companies with incompatible networks (Sprint’s CDMA and Nextel’s iDEN networks) what caused Sprint’s problems in the first place? How would adding a third incompatible network – T-Mobile’s GSM network – to Sprint’s CDMA and iDEN networks help? Sprint’s biggest asset continues to be the elegant CDMA network they built.
True enough, Sprint has its hands full. The recent Standard & Poors downgrade to junk status hasn’t helped.
And of course, Sprint must solve its WiMAX strategy. When is Clearwire going to acquire Sprint’s Xohm network, with Intel, Google and the MSO’s help? Most thought it would be at CTIA last month. Herding cats in multi-party deals is never easy!
Interestingly, last week UBS did a piece on 1Q08 mobile numbers in the US. Postpaid growth is slowing, with only 1.4M new postpaid adds in 1Q, down from 2.6M added a year ago. Postpaid growth has fallen to 7% (down from 8% for last 3 quarters) and UBS believes it will fall to below 5% by year-end. Much of the postpaid growth is at VZW and AT&T, at the expense of Sprint. Interestingly, the iPhone accounting for 30% of AT&T’s 2H net adds, with ARPUs of $90 (vs. $57 for rest of subs). With postpaid growth slowing, and VZW and AT&T extending their lead among the Big Four, one can see why DT is mulling a combination. Much more interesting would be a Sprint-ALLTEL combination, a Sprint acquisition by Google, or SK Telecom investing.
What do you think?
As always, your observations are right on the mark. The combinations you mention make far more sense than a Sprint T-Mobile one. It is clear how doing the deal with Clearwire to spin off its WiMax play and get rid of the earnings drain can help Sprint. (Of course, the big winner in that deal will be Clearwire.) It isn't clear at all how a D-T takeover helps either Sprint or T-Mobile solve their problems.
Posted by: Nezam Tooloee | May 08, 2008 at 12:23 PM