Sprint and T-Mobile: Live Together or Die Alone

Sprint Nextel (NYSE: S  ) stands alone in the American market with a WiMAX network half-completed. Not only is Sprint the only company to get 4G service off the ground -- in a buddy-buddy partnership with ClearWire (Nasdaq: CLWR  ) -- but it's also the only company to choose WiMAX technology over the competing LTE standard.

All of that may change in the not-too-distant future. In an interview with the Financial Times, Sprint CEO Dan Hesse hinted at the possibility of joining the LTE crowd, too. The company owns enough radio spectrum licenses to support LTE and WiMAX networks at the same time, according to Hesse. In fact, hardware moguls Huawei, Samsung, and Motorola (NYSE: MOT  ) are already bidding on supplier contracts for Sprint infrastructure spending that could include LTE.

Making the technology leap would put Sprint right in the mix with the other big boys and ready to make a deal. Combining Sprint's 48 million wireless subscribers with the 34 million customers of Deutsche Telekom subsidiary T-Mobile would create an 82-million colossus. Economies of scale would make this a credible competitor to market leaders Verizon (NYSE: VZ  ) (93 million subscribers) and AT&T (NYSE: T  ) (87 million), overthrowing the traditional balance of power in one fell swoop.

T-Mobile and Sprint have explored trading rings before, but their different hardware strategies put a wet blanket on that plan. Now it sounds like Sprint is ready to make a change and try again. None of this would happen quickly, mind you. Give Sprint a chance to start building that fancy new network before you send out the wedding invitations. But it's a match made in a Las Vegas shotgun shack: T-Mobile needs 4G spectrum licenses and Sprint needs enough subscribers to look like a serious contender.

A merger of near-equals would make all their dreams come true. This makes too much sense not to happen in the next couple of years, I say.

What's your take? Discuss in the comments below.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Sprint Nextel is a Motley Fool Inside Value selection. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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Comments from our Foolish Readers

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  • Report this Comment On July 13, 2010, at 4:05 PM, Networker50 wrote:

    Sprint is still reeling from the Nextel merger, is operating two networks and selling devices on a third so I suppose all it needs is a third network to build/operate and yet another product line based on a fourth technology. I don't think so. In my opinion the company is barely getting an even footing and needs to get back to a steady state under normal operating conditions prior to getting involved in another multi year dance. Lets get gross adds under control, churn down close to Verizon and ATT first. Then how about finally taking care of the employees again by re-instating regular 401K contributions, merit increases, education re-imbursements and other benefits that have fallen recently. If they cannot do that then they certainly are a poor merger partner.

  • Report this Comment On July 13, 2010, at 6:16 PM, duranliam wrote:

    Sprint would actually benefit greatly from merging with T-mobile. 4G is the future of wireless and having more customers to sell it to can only be beneficial. The fact that Sprint is supporting two old networks is another incentive to get this done. As Sprint (and T-mobile?) expand their 4G network(s) and available devices they will be able to move customers off of the old networks and eventually shut those networks down. AT&T did exactly that with their old TDMA ("Digital") network when they got their 3G network going.

    On the down side, Having two 4G networks based on competing technologies will be problematic, and I am surpised that Sprint is willing to jeopordize their investment in Clearwire by possibly supporting LTE. It makes me wonder why Sprint recently increased their stake in Clearwire, because this puts the long term viability of WiMax and Clearwire into question.

    Sprint is obviously on the LTE/Wimax fence and should move their 4G network to just one of them. I don't know if one is better than the other, but having both would be confusing for customers: "why can I use my phone on the 4G network at this location but I can't use it on the 4G network over there??". It would also be expensive for Sprint/T-Moble.

    I say do the Merger, pick one 4G technology and run with it.

  • Report this Comment On July 13, 2010, at 8:02 PM, kmet15 wrote:

    This would be another Sprint disaster!!...The merger with Nextel is a text book case of how not to merge. Now they will go with T-mobile. It would mean death to one company, namely t-mobile.

  • Report this Comment On July 13, 2010, at 8:42 PM, kitikatism wrote:

    Merger...not happening. Would be the death for both companies. Sprint is just now showing signs of life. ClearWire selling services to T-Mobile, now that makes sense. ClearWire can run WiMax and LTE and sell those services to one and all.

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