Rumors have resurfaced that Deutsche Telekom is interested in acquiring
Sprint Nextel. According to a Sept. 13 story in London's
Daily Telegram, Deutsche Telekom, parent company of U.S.
carrier T-Mobile, is preparing an offer worth more than $10 billion for Sprint,
the No. 3 U.S. carrier behind AT&T and Verizon.
The story of a possible merger first appeared more than a year ago, but nothing
materialized. Daunting challenges, including arranging financing and the
difficulties of merging different systems with competing technologies, may also
prevent the currently rumored merger. T-Mobile uses GSM while Sprint deploys
CDMA (Code Division Multiple Access) and Nextel's IDEN (Integrated Digital
Enhanced Network) technologies. Sprint acquired Nextel in 2005 and has
struggled to integrate the IDEN technology.
In addition, Sprint and T-Mobile are pursuing different paths to fourth-generation
technology. Like AT&T and Verizon, T-Mobile is committed to LTE (Long Term
Evolution) while Sprint is going with WiMax.
Deutsche Telekom CEO Rene Obermann reportedly
sees a merger as a way to revitalize T-Mobile's struggling operations in the United
States and United
Kingdom. Obermann blamed Deutsche Telekom's
first-quarter loss of $1.46 billion on T-Mobile's sluggish performance. Deutsche
Telekom squeaked out a second-quarter profit, but through cost-cutting and not
subscriber gains.
In early afternoon trading, Sprint shares were up almost 13 percent to $4.26 thanks
to the merger rumor.
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