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On Call runs every two weeks, alternating between answering reader questions and discussing hot topics in the cell phone world.
Bloomberg today revived a long-simmering story in the wireless world when it reported that Deutsche Telekom is considering selling its T-Mobile USA subsidiary to Sprint Nextel. A deal is nowhere near definite, sources told Bloomberg, but the two companies are debating a valuation for the country’s fourth-largest carrier.
More merger mania
Mergers between wireless carriers do happen–remember that Sprint and Nextel got hitched almost six years ago–and the possibility of a T-Mobile/Sprint marriage has been bounced around since 2009. The rumor received a lot of fuel last summer after Sprint CEO Dan Hesse said he sees “logic” in consolidation. Hesse didn’t elaborate much on his point, but that was all many analysts needed to begin comparing balance sheets.
At the time, I wrote a column on why I saw a merger as unlikely. Disparate technology was one reason, and I didn’t savor the idea of meshing T-Mobile’s relatively strong corporate identity with Sprint’s, well, not-so-great image. I still stand by my second point, but I’ve come around a bit on the technology side.
Though many tech journalists, myself included, rightly point to Sprint’s struggles to mesh Nextel’s iDEN network with its CDMA technology, it’s a different world than it was in 2005. As carriers move exclusively to bridging 4G technologies over the next few years, terms like CDMA and GSM won’t matter as much. So in the long term, a T-Mobile/Sprint merger could make sense.
So how would it work?
In short, it could all come down to LTE. Sprint is firmly on board with WiMax at the moment and it will presumably continue that way for the near future. In a few years, however, the carrier should move to LTE as Hesse has indicated.
T-Mobile, on the other hand, still is riding the HSPA+ train. True, it’s not a real 4G technology–despite T-Mobile describing it as such–but HSPA+ is offering data speeds that can match its rivals at least for the time being. Yet, at some point T-Mobile will need to move on to LTE as well. And if Sprint is walking the same path, then things could work.
Sure, I’m simplifying things a bit and making predictions that may not turn out to be true, but the point is that integrating the carriers’ CDMA and GSM networks doesn’t have to happen. A real 4G technology like LTE Advanced can act as a bridge. I think Sprint has learned a lot from the Nextel integration–and it finally appears to be getting the mess in order–though those lessons may be irrelevant. I’m still not excited by the prospect of blending the two brands, but mergers deemed good for a company usually move forward, whether they’re good for customers or not.
Updated March 9 at 10:55 p.m. PT: While speaking at the Deutsche Bank AG Media & Telecom Conference on Wednesday, Sprint CEO Dan Hesse said “every option” for the carrier’s future include Clearwire and WiMax. Bloomberg also said that Hesse refused to comment on a possible merger with T-Mobile.
