It will be rough, but should shake out OK in the long run if they get approval. The Nextell system is old and hard to upgrade. Here are a vew stories.
The proposed merger of Sprint Corp. and Nextel Communications Inc. could face a shaky start as the companies work to run and eventually merge two wireless technologies without losing a ton of money or customers. With Nextel, Sprint is acquiring 15.3 million subscribers and a network based on Motorola's Corp.'s Integrated Digital Enhanced Network, or iDEN, digital radio technology. But iDEN doesn't work with the Code Division Multiple Access, or CDMA, the standard used by Sprint's 20.1 million existing subscribers. For the combined Sprint Nextel to take full advantage of the merger, a lot of stuff like the base stations and other equipment that carries calls would have to change. In addition, customers would have to get new phones. Nextel and Sprint say they have a plan that won't be so disruptive. But it'll come at a cost to subscribers.
Sprint and Nextel announced their intention to merge today, forming a network embracing 35.4 million subscribers and reducing Americans' national mobile network options to four: Cingular, Verizon, Sprint Nextel ("Sprextel") and T-Mobile. After completing the merger in late 2005, the two companies would spin off Sprint's local phone service to become all mobile, all the time.
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By pairing up with Sprint, Nextel finds a way out of its current technology dead-end. Nextel phones run on iDEN (Integrated Digital Enhanced Network), which has no clear upgrade path to the high-speed data services, the likely future path for mobile phone companies. Nextel's been testing out Flarion's Flash-OFDM (a 10-word acronym) high-speed data system in North Carolina, but up until now the company said it wouldn't open up any kind of national high-speed network until the end of 2006 at the earliest – a full year behind Sprint, Verizon and Cingular.
As part of the merger, "Sprextel" promises to roll Nextel's network over to CDMA (Code Division Multiple Access) with EVDO (Evolution/Data Only) high-speed data, the strategy being used by Sprint and Verizon. That technology offers a smooth path into the future, and it's used by more people than iDen, so equipment is cheaper and more plentiful.
Sprint, meanwhile, gets Nextel's spectrum. Nextel recently cut a deal with the federal government to trade some of its existing 800 Mhz spectrum for bands at 1.9 GHz, the same band Sprint uses. Sprint also gets Nextel's customers – a proud, cultish bunch of business owners who've counted on Nextel's legendary reliability and good customer service ever since the company was a dispatching network for truckers and taxicabs.
* Sprint-Nextel Merger
* Mobile Phones Product Guide
Winners and Losers
In the short term, all the news is good for subscribers. Nextel plans to keep its iDen network in its current shape until at least until the end of 2007. Nextel and Sprint will be able to share cell-tower real estate to improve coverage, and they'll work on letting push-to-talk work between their two networks.
In the longer term, though, the merger is full of questions for Nextel users. Push-to-talk (PTT) over existing CDMA systems is nowhere near as good as Nextel's current system. Nextel is betting that PTT over EVDO will be good enough to wean most subscribers off iDEN, and that subscribers won't decide to jump over to the very similar PTT-over-EVDO service Verizon plans to provide.
Moving subscribers from iDEN to CDMA could also be messy; it'll require new handsets and may split up Nextel's spectrum between the two networks, which could endanger call quality. Motorola has pledged to release a dual-mode phone to help bridge the gap.
On the other hand, the merger will be great for existing Sprint users. Sprint will get access to Nextel's new 1.9 Ghz spectrum, and as the companies merge (provided they handle things like combining their billing systems), Sprint subscribers should see stronger signals and fewer dropped calls. Virgin Mobile and Qwest prepaid users may also get clearer calls; those companies use Sprint's network. Boost Mobile users, on Nextel's network, will have the same questions Nextel users do.
The merger probably spells the death of Nextel's Flash-OFDM trial. For a little less than a year now, Nextel has been testing this super-high-speed data network in the Triangle area of North Carolina, aiming to knock down EVDO mobile networks and WiMax connections to homes and offices in one swoop.
But Flash-OFDM may yet return. Between them, Sprint and Nextel have slices of 2.5 Ghz spectrum covering much of the U.S. That's commonly thought of as a "fixed wireless" band, where operators like Sprextel would use technologies like WiMax to beam high-speed Net connections to homes or offices. In a November interview with Mobile Pipeline magazine, Nextel exec Bin Shen said the company wanted to use 2.5 Ghz for a technology that works both at home and on the road. Flash-OFDM just might fit the bill. Some variant of EVDO might also work, though.
The big losers here are Motorola and T-Mobile. Motorola has an exclusive license to develop iDen phones, and its iDen phones are its most profitable. Now, it'll have to compete with the likes of Sanyo, Samsung and LG for Sprextel's business. T-Mobile, meanwhile, will look like a dwarf surrounded by the vast, muscular national networks of Cingular, Verizon and Sprextel. It may have to merge, transform or evaporate.
This merger isn't quite a done deal. The FCC might still scupper it, though that's not likely; the current FCC is pretty merger-friendly. And there have been various noises about a competing Verizon bid for Sprint, though the sheer size of the behemoth that would create might horrify even the conservative FCC. With no obstacles, expect Sprextel to come to a phone near you late next year.
