Sprint, Nextel All Hooked Up

During the stock market's recovery in the past few years, the pace of major mergers has been relentless. In the quest to separate cell phone users from more of their hard-earned dollars, the six major U.S. wireless service providers have been part of that game and have now whittled themselves down to four. Cingular (which is owned by SBC Communications (NYSE: SBC  ) and BellSouth (NYSE: BLS  ) ) and AT&T Wireless tied the knot last year, and today it's Sprint (NYSE: FON  ) and Nextel (Nasdaq: NXTL  ) reciting their vows.

Both the Federal Communications Commission and Justice Department approved the $35 billion merger, after concluding that there is still enough competition among carriers to prevent any company from monopolizing the market. When the bell rings at the New York Stock Exchange on Monday morning, Sprint Nextel will begin trading with the ticker symbol "S."

The unique pairing sets up a future full of potential. While huge mergers such as this are often detrimental to investors, Sprint Nextel could be an exception.

Over the past three years, Sprint's wireless division has aggressively courted millions of customers with low-priced plans and sleek phones. Nextel, meanwhile, has been successful at landing the cream of the consumer crop -- mainly business users that spend lots of time on the phone and rack up huge monthly bills. As a result, stock in the two companies has been thriving lately. Leading up to the merger, in fact, both companies have been trading very close to their 52-week highs.

In offering branded wireless services, Sprint has also been a leader in wholesaling network airtime out to other companies -- including successful mobile virtual network operator Virgin Mobile USA -- that target specific customer demographics. Many observers see virtual operators as the key to growth in markets that are becoming saturated -- particularly the United States, where more than 60% of the population has a wireless hookup.

Perhaps the greatest product platform enabled by the combination of the two companies, however, is a future wireless broadband service to be deployed in the 2.5GHz frequency band. Together, Sprint and Nextel own licenses to the band covering more than 80% of the country.

With the possibilities opened up in wireless broadband, the new entity is aiming to be a lean and mean competitor focused on future services -- not that of an incumbent protecting an aging user base. So far, the management of both organizations has a history of profitable moves for investors, and the future will likely hold more of the same.

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Fool contributor Dave Mock voted for the new company's name to be Sprextel, but for some reason no one takes his suggestion seriously. He owns no shares of companies mentioned in this article.


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