Nextel and Sprint Agree to Merge
The $35 billion merger between mobile phone companies Sprint and Nextel isn’t as big as the $41 billion Cingular-AT&T Wireless deal, but it is consolidation in the US cell phone business that Wall Street has wanted for some time. While it still needs to get past the regulators, the dovetailing of Nextel’s “walkie talkie” feature so popular among businesses with Sprint’s consumer wireless strength looks like a fit. The only problem is they are trying to be too damn fair about things to really make the thing work.
The two companies are roughly equal by most basic measures. And so, they have split the new board 50-50. And as Sprint spins off its local telecom business, the board there will be half Nextel people as well. In addition, they are going to keep the two head offices, at least for a while. The market has been less than excited about this particular aspect of the arrangement. Eventually, somebody is going to have to give way on something if the integration is to work.
They haven’t even sorted out who’s running the show. Gary Forsee, Sprint’s top guy who will get the CEO title if the deal happens, will have to deal with Tim Donahue, Nextel’s boss of bosses, who will take the job of executive chairman. Eventually, Mr. Donahue is expected to bow out. However, the period of cohabitation is inherently going to be tricky, as it always is with two CEOs sharing the responsibility. That is not to say they can’t work it out, but rather to point out that there’s a big job ahead in integrating the two companies. Two wills speaking with one voice is a tough trick.
This merger chops the US market down to four carriers, and for that reason, the FCC may be hesitant to OK it. Cingular already ate AT&T; Verizon and T-Mobile USA round out the market. Just what protection consumers will get in this less competitive landscape is the open question. This is especially true as T-Mobile USA is a distant fourth, and while being part of a larger global group does let it punch above its domestic weight, some have questioned its long-term viability as the smallest of four.
On the other hand, technology has a way of balancing things out in the field. Voice over internet telephony has already made traditional landlines far less vital than before. And as cell phones evolve into multi-purpose electronic units with web capability, it may be that carriers from other fields find ways to enter the wireless market. While the barriers to entry are substantial, there are several computer-related companies (Microsoft, Google, HP) that could make the leap into the business as it will become. All the same, if the FCC lets this go ahead, it should be on the understanding that business runs badly as a 50-50 deal.
© Copyright 2004 by
The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without
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