Coming Soon? GSM Handsets for Sprint/Nextel Customers

Deutsche Telekom Considering Sprint/Nextel Takeover

Even though the Microsoft/Yahoo courtship and apparent breakup does have implications for the mobile industry, the whole situation just didn’t peak my interest as much as this news item regarding the possible takeover of Sprint/Nextel by Deutsche Telekom.

The first thing to note is that DT is the parent company of T-Mobile in the US. If this potential merger actually happened it would create the largest wireless provider in the US. The new company would be bigger than AT&T or Verizon.

Now that would be a game changer. The Microsoft/Yahoo thing is interesting, but given Microsoft’s past track record doing big purchases, it is hard to see how a Microsoft/Yahoo merger would immediately impact what is happening in the mobile world. It might be a long while, if ever, before we saw something significant come out of their merger.

Now the DT/Sprint combination is different. First off, T-Mobile is based on GSM, Sprint is based on CDMA, and Nextel is IDEN. These are different and incompatible technologies. If this merger were to happen, then you would think there would be a lot of talk about consolidating customers under one technology, but which one? DT’s roots are in Europe which is all based on GSM. It would be a really big project that would take a lot of time if a decision was made to make GSM the foreground technology while CDMA moved into the shadows.

Maybe T-Mobile would ask (“force”) Sprint/Nextel customers to upgrade to a GSM handset when their contracts expired. Then again, there is a lot of cool stuff running on CDMA/EVDO that isn’t common or available on GSM. And then-then again, GSM would let Sprint customers easily roam when in Europe. The possibilities seem pretty endless on what could be done.

Overall such a deal seems like it would make sense for both parties. The deal would strongly improve DT’s position in the US, and would pull Sprint out of the suppressed state that it is in right now.

The other dynamic in play is the current price war going on between the US operators. “All you can eat” fixed price plans are now the standard. This could potentially create a “death spiral” where constant cutting of the fixed “buffet” price leads to a situation where no one makes any money. By taking out Sprint, T-Mobile could benefit from some long term price protections.

The cheap-dollar also becomes a big factor in this type of deal. T-Mobile in the US isn’t flush with cash, so the DT parent company would have to step in. DT has lots of cash, and a favorable currency market, so the purchase of Sprint could turn out to be a real bargain for them. I’m not a financial guru, but some of these factors seem obvious.

And lastly, with WiMax on the horizon, Sprint’s leading position in this technology area is another little enticing carrot for any potential suitor. On the down side, there will probably be a lot of anti-trust issues with a foreign company owning such a big piece of the US telecom infrastructure.