So much for a quiet holiday.
Mere weeks after the closing of a massive $41 billion merger of Cingular Wireless (owned jointly by SBC Communications and BellSouth) and rival AT&T Wireless, the wireless industry is hot with rumors of the next major deal. This one pairs Sprint PCS (NYSE:FON) with walkie-talkie pioneer Nextel Communications (NASDAQ:NXTL).
On top of this -- only days ago -- two affiliates of Sprint, Alamosa Holdings Inc. (NASDAQ:APCS) and AirGate PCS Inc. (NASDAQ:PCSA), also agreed to merge together.
While the latest rumor is just that, several sources have said the deal is in the advanced stages with approval from the board of directors the only milestone left before announcing the deal. Current speculation is that Sprint will consume Nextel shares in exchange for 1.3 shares of its own plus some cash.
If the reported $36 billion deal goes through, Sprint and Nextel will combine to form an entity offering wireless service to 39 million customers. It will also reduce the major players in the industry from what used to be called the "big six" to just four -- Cingular, Verizon (NYSE:VZ), Sprint/Nextel, and T-Mobile.
While Nextel has been a star stock performer since mid-2002 -- up 500% -- industry analysts have always questioned its future. Nextel's issues with incongruent spectrum and its use of proprietary technology from Motorola (NYSE:MOT) called iDEN has made its upgrade path to next generation services a complex issue.
Yet Nextel holds a very attractive customer base that spends about $70 per user per month, well above other carriers. Its Boost Mobile subsidiary, which targets teens and young adults, is also booming, having just surpassed 1 million subscribers.
The weight-challenged lady may not be singing, though. As if the story were not already compelling, Vodafone may be considering a bid to top Sprint. Vodafone lost AT&T Wireless in the dramatic final moments to Cingular, so if the global carrier does show an interest in Nextel, it will likely pull out all the stops to win this deal, though government approval may be tough to win in this case.
The year 2004 will certainly go down as the year the wireless landscape changed significantly. With the Federal Communications Commission (FCC) reporting recently that consumers in some major markets have seven or more choices for wireless service, the industry has long been ripe for consolidation.
Fool contributor Dave Mock can walkie and talkie at the same time he chews gum. He owns shares of Motorola.
