Sprint Nextel: Best of Both Worlds?
The announcement Wednesday in New York that Sprint Communications Co. L.P. and Nextel Communications Inc. will merge, creating the third largest wireless provider in the United States, is being called a marriage of equals. The new companySprint Nextelwill use both names, and operations will be merged, as will management. The companies will also have to merge their disparate technologies.
The most obvious change will be in the Direct Connect feature that has been Nextels prime offering. With this, a user can press a button to communicate directly with another user, just as they might with a walkie-talkie. The difference is that this communication can span a continent as easily as it can span a neighborhood.
Business users have adopted this capability gladly because it has been very effective and reduced complexity. Sprint has tried to introduce a similar capability, and while its been available for some months, the service does not work as well, latency is legendary, and its not widely adopted. With the merger, Nextels technology will be brought to Sprints CDMA (Code Division Multiple Access) network, with the combined company hoping that business customers come with it.
The move to CDMA is, in itself, a critical move, said Forrester Research analyst Lisa Pierce. "It means CDMA wins," Pierce said. "It becomes the predominant wireless technology in the country."
Until the two companies announced their merger, Nextel had been using IDEN (Integrated Digital Enhanced Network), a protocol well-suited to direct connection, or "push-to-talk" communications. Unfortunately, it did not provide acceptable support for high-speed data communications. Nextel had been wrestling with that issue, as well as the need to change from its 850MHz frequency allocations to 1.9GHz as a result of a frequency change deal with the U.S. government. The merger with Sprint means that both changes can be accommodated by the same equipment changeover.
Sprints EV-DO (evolution-data optimized) wireless data technology already provides data rates up to 500 kilobits per second, which is faster than its GSM (Global System for Mobile Communications) competition. The carrier is already rolling out EV-DO equipment. Pierce noted that Sprint has yet to announce which cities are getting the new service first or to provide a schedule of implementations for next year, but she said that the merger should spur Sprint to "propel higher bandwidth services."
Pierce said she doesnt think that the announcement means the Sprint Nextel team is home free. AT&T Wireless already has broad support among business users, and it has already deployed its EDGE (Enhanced Data for Global Evolution) high-speed wireless data network. In addition, the combined AT&T-Cingular Wireless LLC. network will soon upgrade its wireless capabilities to higher speeds.
But AT&T-Cingular doesnt have an edge either, according to Pierce. Despite their broad business appeal, Pierce said that AT&T and Cingular have real problems with call quality, which is very important to the business community. While Cingular is working hard to upgrade its network, a great deal of work remains to be done.
But Nextel also has some significant work to do in its move from IDEN to CDMA. Pierce said that such a move can be very difficult for a company and its customers, and a great deal of their success will depend on how well the move is managed. While Motorola has already committed to making dual-mode phones that will bridge the two networks, its not yet clear how well they will work.
In the end, the near-term success of the SprintNextel merger will depend as much on how the technology changes are managed as on the technologies themselves, Pierce said.
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