Less than two months after Cingular Wireless L.L.C. garnered governmental approval for its $41 billion acquisition of AT&T Wireless Services Inc., creating the nation’s largest wireless operator, a Wall Street Journal article today indicated another big deal could be in the works between No. 3 Sprint Corp. and No. 5 Nextel Communications Inc.
The report cited speculation on Wall Street that a possible deal between the two carriers was becoming increasingly likely, though neither Sprint nor Nextel would comment on the report.
Analysts have speculated about a possible combination between Sprint and Nextel for some time, noting such a deal would create a third “mega-carrier” with more than 38 million subscribers that could compete more effectively against the recently strengthened Cingular and No. 2 Verizon Wireless. Many have also noted that following Cingular’s acquisition of AWS, government regulators would likely approve only one additional merger between the country’s nationwide operators, which would bring the number of large carriers down from six to four.
Further fueling merger rumors is Nextel’s pending decision on its next-generation technology path. Analysts noted that if Nextel decides to install a CDMA-based network using the 1.9 GHz spectrum it’s likely to acquire from the Federal Communications Commission as part of a re-banding effort designed to reduce interference in the 800 MHz spectrum band, Nextel could set itself up for a possible deal with either Sprint or Verizon Wireless.
On the other hand, analysts noted that if Nextel decides to implement a non-traditional technology similar to Flarion Technologies’ Flash-OFDM system, which Nextel has installed in parts of North Carolina, the carrier could be readying to remain a standalone entity.
Another potential tie-in between Nextel and Sprint is that both companies control significant spectrum holdings in the 2.5 GHz spectrum band, which both carriers have previously said they could use for next-generation services.
Standard & Poor’s Equity Research reiterated its “strong buy” on Nextel’s shares, noting a combination with Sprint would provide an even stronger leadership position in the wireless business market. Nextel is currently seen as a strong player in the business market led by its Direct Connect walkie-talkie service, while Sprint has recently reorganized its business operations to provide a better focus on lucrative business customers.
