More on Sprint/Nextel, T-Mobile
This is a nice summary of the recent Sprint/Nextel merger. It was written by Jason Hornik, Senior Research Analyst at Wireless Capital Partners:
"Sprint Corporation and Nextel Communications, Inc. have agreed to combine in a merger of equals. Assuming the transaction closes in the 3rd or 4th quarter of 2005 as expected, the new entity, Sprint Nextel, will have the following characteristics: approximately $70 billion in equity value, over 35 million subscribers, a nationwide network covering over 262 million people, the highest wireless industry ARPU (average revenue per user), a strong market share of business users, and over $40 billion in annual revenue. The transaction values both Sprint and Nextel equally, with each shareholder group receiving 50% of the combined entity. At the announcement, Nextel shareholders were expected to receive approximately 1.28 shares of Sprint Nextel and $0.50 in cash per share, which Sprint shares will remain outstanding. Sprint’s local telecommunications business will be spun-off by the combined entity. Numerous synergies and cost savings are expected as a result of the business combination. These include: reduced network operating expenses through reduced cell sites and switches, reduced capital expenditures, migrating Nextel backhaul traffic to Sprint’s long haul infrastructure, consolidated backoffice operations, reduced sales & marketing costs, reduced general & administrative costs, and the development of a nationwide IP-based multimedia network."
"As soon as the Sprint Nextel merger was announced, there has been public speculation that either Verizon Wireless or T-Mobile would attempt to derail the transaction. Either company could feasibly entice the Sprint or Nextel management or shareholders with an alternative business combination opportunity which would be to difficult to ignore. Specifically, many analysts believe that Verizon could make a bid for Sprint. However, Verizon would need the support of Vodafone plc, Verizon’s financial partner in the Verizon Wireless joint venture. Vodafone has most recently stated that it has no plans to make a bid on either Sprint or Nextel. As for T-Mobile, the company currently desires additional spectrum and would significantly fall behind its competitors in total subscribers should the Sprint Nextel merger close. T-Mobile would arguably be much better positioned by acquiring Nextel, even though their networks would be difficult to integrate. However, Kai-Uwe Ricke, chief executive of Deutsche Telekom, has ruled out making acquisitions or stepping up investments. Mr Ricke told the Financial Times he believes that the US market is large enough for four players, and that T-Mobile USA will have the opportunity to grow without needing to change its strategy or raise its already considerable investments."