Sprint and Nextel have officially announced plans for a "merger of equals" to create the third largest wireless carrier in the US and phase out Nextel's iDEN network.
Sprint and Nextel have officially reached an agreement on merger terms, a plan that will create the third largest wireless carrier in the United States.
The $35 billion USD merger would create a single company, dubbed Sprint Nextel, with a combined subscriber base of 39 million users, very close to Verizon Wireless' 40 million subscribers. The near-equal merger would give current stockholders of each company exactly half ownership in the combined company. After the merger is completed, Sprint Nextel would spin off Sprint's long-distance landline service as a separate company.
For Nextel, the deal is a way to cope with the challenge of upgrading the company's unique iDEN network to support 2.5G and 3G data services, a process that would require more wireless spectrum than Nextel currently has as well as considerable equipment investment. For Sprint, it gives the company access to Nextel's loyal and lucrative business customer base and widely-popular Push-To-Talk (PTT) technology. Although the combined company will, for a time, maintain both a CDMA 1x network and an iDEN network, the iDEN network will be phased out in favor of CDMA service. How the combined company will handle migrating Push-To-Talk functionality is unclear.
The merger still requires permission from US government regulators, but that is not expected to be a challenge as those regulators approved the much larger Cingular/AT&T Wireless merger earlier this year. However, rival Verizon is rumored to have been considering a bid to buy out Sprint itself for some time. Verizon and Sprint currently run the two largest CDMA networks in the United States. Although Verizon has not yet made any decision regarding bidding for Sprint, such an offer, were it made, would surely delay any Sprint-Nextel merger plans.
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