Undoing the Sprint Nextel Merger

Could the Sprint Nextel (S) merger be undone - from a technical perspective?

An iDEN spin would be complex, but it would still be achievable with competent people in charge, and not as difficult as projected, given the relative lack of integration between the iDEN and CDMA networks.

Kathy Walker, Chief Network Officer, is quoted in the Washington Post article "Sprint Merger Would Be Hard to Undo, Officer Says" saying "With everything we've done, it'd probably take longer to undo it." This quote took the headlines from the publicly available Bear Stearns conference that took place on March 12, 2008.

If you listen to the whole event, though, you get a different picture of the level of integration that has taken place between the iDEN and CDMA networks. On a cell site collocation basis, Ms. Walker indicated that, to date, only 10% of iDEN and CDMA cell sites had been collocated. Furthermore, she said that it turned out that the costs of collocating existing sites was much higher than anticipated, so, a significant percentage of those 10% of collocated sites were for new construction. This matter-of-fact response, if accurate, calls into question one of the major drivers for the justification for the original $12B savings claim that would result from the Sprint and Nextel merger, that is, collocation savings. As such, if less than 10% of existing sites are currently collocated, then there has been public disclosure at least through this media conference of why the original projected cost savings were never realized.

Next, in response to another question on just what had been integrated between the two networks, Ms. Walker cited the following items: voice mail, messaging platforms, billing and field technical support. Generally, from a network element perspective, these are all generic, standard interface, technology independent platforms, and, with the exception of the billing platform, a relatively low proportion of total network value.

Since there have been limited cell site collocations, the opportunity to leverage backhaul over a single transport pipe also appears to have been limited. The big ticket network items, namely, switches, HLRs, base stations, BSCs, OMCs for each technology were disclosed to be operating separately.

So, besides the largely peripheral or secondary, standardized network elements just mentioned to be "merged," Sprint has at least managed after more than two years to have implemented a single physical Network Operations Center, or NOC.

A footnote on the merged field technical support staff: it was disclosed that, in large markets, the technical support people likely retained their specialization of either iDEN or CDMA technologies. Thus the cross-training of field staff has likely only occurred in secondary markets.

How hard would it be to split off iDEN in the case of a spin-off? Probably not as hard as the Washington Post article or Sprint indicates. The major tasks needed, in addition to recreating headquarters, sales, customer care and retail functions, would be: augmenting technical support, building a new NOC, planning for an HLR and billing system cutover, procuring ancillary network elements or reverting to existing ones, and, or course, negotiating procurement and support agreements with vendors and partners.

Conclusion

To be sure, an iDEN spin would be complex, but it would still be achievable with competent people in charge, and, from a hardware point of view, not as difficult as projected, given the relative lack of integration between the iDEN and CDMA networks.

Comments

[West Crowe]

Ed Ketchoyian please stop. Are you going to beat Sprint until it's gone? Why so much anger towards Sprint? Why do you want to break Sprint up so much? Why not write about another company? Why do you continue to write the same stuff, everyone else is writing? Did Sprint kick your dog or something? I just don't get it anymore. When Cingular bought At&t back in the day, they bleed money and customers for awhile. Now they are number one, why can't Sprint turn it around? When all of Mr. Hesse's plans are completed Sprint will be back.

[realityknocking]

Yet another case of repackaged fragments from someone looking to claim that they are a published author.

[Beth]

And the LEGNxtl would be "sprinting" to get back to their roots.

[cac]

As a former Nextel employee, we all saw this coming when it was announced. Kansas is a strange place with really strange mentalities. The reason the merger didn't work was very simple, the wrong person took the helm. Plain and simple, it was not a merger of equals, Sprint acquired Nextel. Then they put into place a plan to totally dismiss all former Nextel employees thinking they were smart enough to pull the merger off. Well here we are today, proving that the were not smart enough and never will be. The best thing they could do is spin off Nextel, have Nextel rehire all of the smart people Sprint let go, rebuild the company to greatness once again, and then acquire Sprint. Just to prove who was actually the smarter company.

[idenguy]

It could be done very easily. The only place the networks touch currently is in the data centers. The nextel data network never moved over to the Sprintlink network and still currently leases the circuits on its ATM network that it did before the merger.

The only hard part will be finding the people to engineer it. With the last round of layoffs, there are very few iDEN guys left here in virginia :(

[Visionut]

I have NO idea what WC is talking about. First of all what's wrong with having ideas/opinions discussed/bloged/publi... Its better to discuss the failures and successes (if any!!), so that may be viable options can comm out of those discussions... As to comparison of Cin/ATT to Sprint/Nxtl, CIN/ATT never became close to becoming a junk status stock. If S goes below $5, Start your timers & clocks for backrupcy proceedings!!! and we are only .60-.70 away from that. So its really good to be positive, but for valid reasons.

Three months has gone by since Hesse has taken over this sinking ship and all we have so far is rehtoric and a few changes at the top!!! IMHO the Board and the entire executive (VP to Directors) need to be rewamped for this ship to have a chance. As these same people were no shows for the past 3 years and got Sprint to this point. What is there to tell you that changing a few figures on top will turn around this ship!!!!

[West Crowe]

Hey Visionut who is left at the top. Maybe one or two who were there when the merger happened. Have you used Sprint in the last three months or are you basing you arguement on articles like this one? My problem with this guy is the fact I have not heard an original idea from him yet.

[Tradewolf]

First, Sprint is not going BK. Long before the filing would happen a buyer would pick it up at these firesale prices. Second, Sprint could be aquired in whole or just the Nextel part by itself, which would be a plus all around. Do some research; there is a big move on by Public Safety/Homeland Security to build out a Nation wide dedicated network. PS always liked Nextel both Phone and PTT. There are Govt people who are involved that were waiting to see if the 700 mhz PS block auction went well and a Private Operation would build the network for them. Well it imploded. They are looking for a Plan B now. But in the meantime congress has now(surprise) earmarked the proceeds of the auctions, all or in part for PS nationwide network use. It is already being considered right now for Homeland Security to pick up Nextel from Sprint. Saves Sprint a ton of headaches, gives them cash, the Feds get their network already built for them and they dont need a Customer Care center either because the only people using the Public Safety network will basically be government. The civvy users will be migrated to Sprint for the most part. Biggest point...it doesnt have to turn any profits ever again, and Sprint has already offered to foot the cost of the rest of the Nextel 800 rebanding. Sprint can then move ahead with their WiMAX. Another point that was brought up is that the Lease arrangements with colocated sites can be a cash stream from the Feds to Sprint going forward. And Motorola is pushing this too, wonder why.... Everyone wins, maybe except the taxpayers, or Verizon and ATT who are going to pay for part of this through their spectrum auction payments :) Its another way this may play out. Stay tuned.

[NextelAccessories]

Sprint cannot afford to spin of Nextel and lose 18 million subscribers, not going to happen!!!

[your dad]

Here is a simple fact the iDEN supporters need to listen to! If DT or VZ buys out Sprint, they wont spin off iden. They will make it go away, along with the rest of the former Nextel employees. THINK about it. You wont be sprinting back to your roots you will be updating your resume. DT or VZ or anyone else will not pay to get iden off 800 in the time frame the FCC has given. If Sprint goes away, iDEN will be a thing of the past!

[eyesopenedwide]

Tradewolf, the cash stream would be true enough except you neglect the fact that Sprint sold off most of the rights to their towers to get the capital they needed to buy Nextel. A big part of the Nextel towers developed in the heyday of the early 2000's were build -to-suit sites, now owned by ATC. At that time, Nextel also transfered prior built/owned towers leaving them with very few vertical property interests.

With regard to Kathy Walker's comments, she actually said it was just less that 10% of sites integrated. In my opinion, the biggest problem undoing these is the fact that the paperwork trail is so bad that they would spend months trying to figure out "where Waldo is".

Considering the economy inpact on real property values right now, along with the Sprint lack of tower ownership and its potential revenue, and a small share network of subscribers that is getting smaller, what does Sprint really own of value right now besides its Spectrum? I disagree that Sprint cannot end up in bankruptcy.

For the legacy people remaining you might want to consider this a possibility as you wait and sweat out the cuts, holding out on voting with your feet, and hoping for that big serverance package. In bankruptcy, their won't be any. Might want to take their offer the next time they ask for volunteers.

My food for thought.

[eyesopenedwide]

By the way, it was disclosed at the beginning of the Bear Sterns conference that Sprint Nextel had both a direct and indirect investment relationship with Bear Sterns. Does anyone know what impact the Bear Sterns fallout had on Sprint Nextel, if any?

[your dad]

LIES! Sprint did not give up towers to buy Nextel. They gave up the local side.

[eyesopenedwide]

I don't know who you get your information from but they belong to Crown Castle who acquired Global Signal assets. I don't lie, I have no reason to. But then most people don't want the truth do they? You might want to check out the facts before you call people on a fact. I accept your apology.

Global Signal Posts 4Q Results
Global Signal's acquisition of Sprint's towers last year weighed on the ... to enable the company to lease space on Global Signal towers through 2008. ...
wirelessweek.com/artic... - 63k

[eyesopenedwide]

VZ and T both have a network of subscribers, something that is quickly dwindling at Sprint. They were aware as early as 2006 that if their churn rate continued, they would be bankrupt by 1st quarter 2009. Yet, in a recently published article, it was revealed that the board of directors didn't think that was big enough issue to address.

I am not picking on a company. Just stating public information and fact. My original comment was in response to tradewolf's comment above: "Another point that was brought up is that the Lease arrangements with colocated sites can be a cash stream from the Feds to Sprint going forward." Sprint is where they are, and what they are by their own doing. They are not the victim here.

With regard to the above opinion expressed by West Crowe regarding Cingular/ATT bleeding their customers, it is not just the customer leeching that is causing Sprint so much financial trouble. Over the past two years, Sprint has also bled their employees, investors, partners, and vendors. Trust is a hard thing to build back.

It amazes me that in a financial forum, where I thought I would read some educated opinions, bloggers attempt to bully others into submission of their own. Your emotional response to the facts would cause one to believe that you are a very scared stockholder who is watching his life savings go down the drain, or one of the same executives who took the ship down. Either way, it supports my opinion that there isn't much left to believe in.

Although I attempted to write a response on a level you can understand, I realize that might not be possible. Let me refer you to Merriamwebster.com so that you might broaden your vocabulary.

[ElBarto]

Having read this article and the responses that have been posted, it leads me to some conclusions.

Sprint and Nextel should never have merged. The fact that they did is in the past. In the famous words "It is what it is", and everyone needs to accept that. Iden did not kill Sprint. Sprint killed Iden. What Sprint leadership didn't realize when they acquired Nextel is that fact that Nextel customers were the most loyal in the industry, paid the highest ARPU in the industry, and overall were ok with customer care. When Sprint took control, they downplayed the importance of Iden, they let go of many of the Iden supporters who worked for the company. The Legacy Sprint employees bastardized the Iden name and that is the reason it is struggling. I am so glad that Dan Hesse is refocusing on the importance of Iden. I think instead of blaming it for all the trouble, Sprint should mirror it on CDMA, which it is starting to do with HPPT. The problem is that it still lacks many of the features that Iden offers to the public sector. HPPT does not have priority connect and the survivability in a disaster is not even close to Iden.

There is another huge problem that Sprint faces, and they won't even acknowledge it. There is still a Us v. Them mentality when it comes to internal employees. This is what really needs to stop. This is causing so much mis-information, lack of assistance, sabatoge, and such that is continually hurting the company as a whole. This is apparent to customers as well. Customers can see that when a team arrives to present, they still introduce themselves as Bob, and state that his background was with Nextel and Mary, whose background is with Sprint. It has been over 2 years since the merger, everyone works for SPRINT NEXTEL. And yes, the name of the company is still SPRINT NEXTEL. I am sure the Nextel piece will be dropped shortly because someone in marketing doesn't understand what that name means in the marketplace.

I have a question for those who say Iden killed Sprint. Prior to merger, which company was performing better? Which company was adding more subscribers per quarter? Which company had higher wireless revenues? Which company had less churn? I am not saying Iden didn't have issues. In a FEW markets the network was over stressed. The data speeds were lacking to say the least. The real thing is that through all of it the company continued to perform at the top of their game.

Selling Iden to the government is a great idea, but the Government isn't in the cellurar business. They would need to have the team to run it. I am sure that there are plenty of former Nextel employees who would love to work with Iden and for the Government. If they did spin off Iden, and all the people who understand the value of Iden were to go with it, Sprint would be in the same situation they were in prior to merger. A underperforming company that continually got their asses handed to them by the competition.

Just my thoughts on the matter.

[your dad]

LOL "Sprint got their asses handed to them" Thats the retard quote of the day.

[Beth]

"I know a guy who works for Sprint and he told me there really is no us vs. them we all just do our jobs and most seem to get along fine. "

Yeah that's because he's Sprint guy not a Nextel guy. Sprint side still has blinders on. Everything is just dandy and there is no world beyond Overland Park.

[xnext]

You are absolutely right, Beth. OP is the center of the telecom universe. If you don't work there, you don't exist as far as OP management goes. My old director said he doesn't trust people in the field to do the right thing, so he keeps everyone in OP. The berms and parking garages provide a great buffer to the real world (subscribers).

[your dad]

So the animosity comes from the iden people then?

[idenguy]

Dad,

The animosity comes from both sides. Being a legacy Nextel employee for 8 years prior to the merger and having dealt with both sides, I can honestly say that legacy Sprint employees are just as hard to deal with as I know the legacy Nextel employees are.

This is a major part of why the merger did not work. There was too much of a culture clash between the two companies and both though their ways were correct.

Nextel prided itself on not letting process and procedures get in the way of anything. If a product or service needed to get out the door, we did it by any means necessary. Sprint on the other hand bogs itself down in tickets and unnecessary paperwork. What should take a couple weeks to deploy / test suddenly takes months.

Something else that slowly happened is that the legacy Nextel managers that are left, slowly surrounded themselves with all the old Nextel people that they had been working with for years and started to exclude the Sprint employees (at least here in Virginia).

Now after several layoffs all the old Nextel power has left the company, gone to ICO, MSV, Clearwire and the ones who are left are all over in Xohm just praying for a spinoff...

[Beth]

Your dad,

It is not about animosity. Nextel was a company that moved things along quickly and whose employees strived for continuous improvement. They were never #1 but that never held them back. They were not conformers. The LEG NXTL employees that I know that are still at the company find it frustrating to here how certain things cannot/will not change because that is the way Sprint has always done them. The cultures and mindsets of employees are too different. What worked for Sprint isn't working for Nextel and clearly what worked for Nextel isn't working for Sprint- those parts that were given a chance at least.

[eyesopenedwide]

If there is any truth to the below comment from Ed's previous blog, then it isn't a matter of IDEN killing Sprint, or Sprint killing IDEN. It looks like it is more of a matter of Sprint policy encouraging a separation. Bottom line in the below scenerio is the total number of Sprint subscribers remains the the same, but someone still profits. One effective way to get a cohesive internal team is to STOP encouraging the conflicts through the current reward system. No doubt this isn't the only place it is happening.


"In regad to the Nextel migrations you don't have a clue. The real issue is the sales staff. They found that they could hit their numbers by selling current Nextel customers (who have been with Nextel at least 6 months) CDMA phones on the Sprint Network and utilizing the P2K system "Port" the Nextel user over therefore getting credit for a sale that isn't a sale. This has been the number one cause of the IDEN Defections, and it is all a game so that these sales reps can make thousands of dollars without really selling a thing!!!

[User 167378]

Its funny to me as a Sprint employee reading posts from legacy Nextel folks as to the speed at which things are done. Our past was similar to Nextel as in the early days, we got things done quickly without the bogging down of Upper Management. Now things are in CYA mode so much after Work Smart Work Careful (Work Scared work very careful) programs were implemented to decrease work errors in the network. We used to compare ourselves to AT&T and laugh that what took them months we could do in a couple weeks. The PCS network was built so fast that capacity was an issue as we were selling service faster than we could put up towers. Now we are the slow and stodgy group that has to schedule simple maintenance two weeks in advance to repair simple problems.

[stuck atsprint]

It's far worse than you think. Didn't anyone read the story on the possible RICO violations? Is it just maybe possible that there are alot more than just text messaging violations?

Is it possible that the gaming goes up the food chain a lot higher than just local sales managers or market directors?

Why are the employees so afraid to talk? Why are so many of them googleing the "Whistle Blower Act"?

This company is in trouble and I believe that it will unravel completely. When it does, I beleive that people will privately refer to it as Enron II the sequal!

[your dad]

Its not as bad as you think! You are not "stuck" if you want to leave then pack up and find somewhere else to work. I agree that Sprint and Nextel have a very similar history.

[Wireless Guy]

NEXTEL Brand. No one is talking about that. It HAD the best wireless brand in the business, most loyal customers, best ARPU, bar none.

What is the pure value of the brand alone?

It would not be as hard to affect a de-merger, as it will be to migrate the spectrum.

Still, with some of the old guard at the helm (Tim) and a team of hands-on managers, vendors and partners, it could be brought back in 24 months, new spectrum and all.

Imagine if Pepsi purchased Coca-Cola 2.5 years ago and let the brand die. It is still a powerful brand, with an intrinsic value in customers' minds and wallets. It is brand which drives up customer base, and takes away market share from competitors.

It is there alright, and as you read this, deals are buzzing, I bet.

An outright sale of Nextel is one of the few major moves that Mr. Hesse and Co, can make to affect immediate and dramatic change, to pay down debt, and to raise cash to rebuild their broken down network. They can then concentrate on their strengths, Voice, Data, and either WiMAX or 4G.

So sayeth I, the Wireless Guy.

[ManagerLooking Out]

Mr. Hesse & Kathy Walker Consider the "Top"

Sprint/Nextel has came so far to one Sprint, but still not one , but each as "I-CDMA"&... but no there are no "I's" in "TEAM".

Sprint's down sizing using the "domino effect" VP's, Directors, Managers, repeated cycle bumping each other all having a slot until the bottom below the Directors/Managers level called the Individual contributor's IC's on the bottom of the pay scale who strived to do the best for the shareholders lost big!

But the bigger costs start with to many Manager's, Directors, VP's and above that never seem to change or see the the bulls eye. You have to many managers not enough workers and no foundation. While the little guy of a spinning "Top" is being let go and pushed out from its feet is only a matter of time before the "Top" falls and the customers/shareholders feels the bigger fall.

As being a manger for Sprint more than a decade seeing people in meeting after meeting. Conference call after conference call, stuck in all the paperwork no wonder this we Sprint is being all eye's on "US". Let the worker's come back to their jobs. Consider the "Top" less weight & expense on top the less out of balance the top will be their use to be 1 director and 5 to 7 mangers for a region now we 7 plus directors for a region and 30 plus mangers at each teir theirs alot of money.

While the all efforts are put into WiMAX/4G/Qchat CDMA! the IDen/CDMA voice network suffers loss due to lack of manpower 4,000 jobs cut and scare tactics that the other IC's employees that are left behind no merit increases and be thankful for a job.

Reconsider a 4,000 cut of jobs and stream line the "Top" the miss management will be undr control.

[EdKetchoyian]

Hi Mr. Crowe, I don't wish my old company any ill, but the facts are the facts. If you went to my blog, you'd see that I'm actually a fan of Mr. Hesse. It's just not clear that a good manager like him can help right the Sprint ship, if, indeed it has been hit by an iceberg and the damage is irreparable. I'm surprised the stock price is this low and has stayed this low. Investors must know something that I don't know to be hammering the price so much!

[NortelMotorolaman]

I spent some time and read all these comments and just had to shake my head. I have been in the RF biz for 28 years now, worked for two major RF equipment mfg's and worked for Nextel before the merge for 9 years and now I am with Sprint Nextel. I think I have seen it all now. In a nut shell Sprint and the corp. vision of Sprint was counter productive. I have never in my life seen such counter production management styles coming from legacy Sprint people. In fact I'd go so far as to say that in most other companies people that think the way legacy Sprint people do would be shown the door. The level of micromanagement is beyond this universe. There is no reason for any of this, it is counter productive and Dan has even said so but yet all the Sprint legacy managers I have had to deal with still are stuck in this insane mode of micromanagement, it is shocking! Dan came right out and said we need to move on things, stop the meetings, stop the red tape and yet every single Sprint manager will not budge, they just keep doing the same darn thing. Legacy Sprint managers and director are KILLING Sprint Nextel corp. Frankly I have had enough and the second I can make the jump to clearwire I am gone! I do not and will not work for a company that does not trust their workers and allow their workers take on the tasked unbridled. I have given this company two years now to get its act together and it has not. Frankly speaking the worst thing in the world that has happened to smart, self motivated, people well educated, people of incredible back grounds was SPRINT! Thankfully there is hope for me, ClearWire!!!!!!!!!!!!

[Jimbocous]

As a legacy Nexteler still swimming in Sprint waters, I can say a couple things. I thought I shed the Bell-head mentality when I dumped Useless Waste 14 years ago. Distressing to see it in full force in OP. If you aren't on the Campus, you've missed the center of the universe. I just finished a project idential in most respects to one I did at Nextel. At Nextel, we did it in three months and were wildly successful. At Sprint, it took me 2 1/2 years, it's now done and handed over to managers that have no clue as to what basic telephony is who are already driving it into the ground. My iDen coverage today is worse than it was when we went commercial in 1994, and that's saying something! Customer Scare gets scarier, the Bell heads still harp about process and procedure, the daily conference calls get longer and the new boss is the same as the old one. Personally, I voted to fire the BOD at the last shareholder meeting. Perhaps if enough people do the same, we might see some results. Hesse talks a good game, but his managers aren't listening any more than Foresee's were. The bureaucracy still rules. Sure hate to see that the 15+ years I have invested in this appear to have been for nought.