Sprint-Nextel Merger: Tech Hurdles Ahead

The $35 billion merger of Sprint Corp. and Nextel Communications Inc. could benefit business customers, but integration challenges await the new wireless carrier.

Pending approval by federal regulators, both companies would gain valuable wireless spectrum, which could give some subscribers better coverage and enable Sprint Nextel, as the new company will be called, to offer next-generation wireless services to compete with rivals Verizon Wireless and Cingular Wireless LLC.

The move is advantageous for Nextel, which uses Motorola Inc.s proprietary IDEN (Integrated Digital Enhanced Network) technology. IDEN isnt as easy to upgrade to high-speed data services as is the CDMA (Code Division Multiple Access) technology Sprint uses.

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Wireless coverage is one reason Boston-based Arnold Communications CIO and eWEEK Corporate Partner Jorge Abellas-Martin relies on phones from multiple carriers for his employees. “I typically dont buy solutions wholesale because some areas are poorly covered by Sprint, so I have to carry Verizon, too,” said Abellas-Martin.

If Sprint Nextel can woo more enterprise IT decision makers, the merger would mean fewer contracts for IT managers, said Bob Egan, president of research company Mobile Competency Inc., in North Providence, R.I.

“For a small company that has 10 phones from Nextel and 10 phones from Sprint, they can now buy 20 phones from one carrier and get a better discount,” said Egan.

For businesses, Sprints efforts in packaging solutions for large enterprises combined with Nextels experience in targeting solutions for vertical markets could create a compelling combination, said Keith Waryas, an analyst with IDC, in Framingham, Mass.

“Over the past two years, Sprint has been doing a ton to make it more business-friendly. Sprint has been aggressive with managed services to make themselves more appealing to the CTO [chief technology officer],” said Waryas. “And Nextel has historically been good at penetrating vertical markets.”

Sprint Nextel would have 35 million to 39 million subscribers, putting it third behind Verizon Wireless and Cingular Wireless.

Before enterprise users see any of these potential benefits, however, Sprint Nextel must clear several hurdles, the first of which is approval from the Federal Communications Commission and the U.S. Department of Justice, a process that lasted about nine months for AT&T Wireless and Cingular Wireless.

The most challenging undertaking for Sprint Nextel will be integrating their networks. For the short term, Sprint and Nextel will run dual networks, but in 2007 and 2008, the company plans to start moving Nextel subscribers to Sprints next-generation CDMA network with EvDO (Evolution Data Optimized) high-speed data.

To ease that transition for subscribers, the company plans to offer a dual-mode phone from Motorola that would operate on both networks.

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