A growing coziness between T-Mobile USA and Sprint Nextel has been rumored for months. At one point there were rumors that T-Mobile’s parent company, European communications goliath Deutsche Telekom, was preparing to buy Sprint and make it part of T-Mobile. So far, nothing had come of it-until now.
The Wall Street Journal reported that Sprint’s directors are considering an offer by T-Mobile to invest in Sprint’s Clearwire 4G service. Sprint currently owns slightly over half of Clearwire, giving it control of that company. Allowing T-Mobile to invest into Clearwire will give Sprint the money it needs to complete the built-out of its new 4G network, and it will give Deutsche Telekom an entr??Â«e into Clear’s LTE development effort being put into place in Arizona.
At first glance, it’s a little hard to nail down why T-Mobile might do this. Sprint is a relatively minor player compared with Deutsche Telekom, after all. Meanwhile, T-Mobile has been aggressively building out its HSPA+ 3G network around the United States. While it’s 3G versus Sprint’s Clearwire 4G, the fact remains that T-Mobile’s network is about twice as fast as Sprint’s.
But in the long run, the future of wireless data is 4G, and it’s a sure bet that Clearwire’s 4G speeds will get a lot faster, especially when LTE becomes part of the mix. While T-Mobile doesn’t really need Sprint’s WiMax version of 4G, LTE is another matter. That’s where the industry is heading, and both Sprint and T-Mobile need to be there as quickly as they can if they are to compete against the LTE network being built by Verizon Wireless. That network should be in limited commercial operation by the end of 2010.
So far, this all kind of makes sense. Sprint needs investments to help build out 4G. T-Mobile needs a path to 4G quickly. Deutsche Telekom can afford to invest in anything it wants, including Clearwire 4G, not only for use in the United States, but also for its global operations. It’s a win-win.
But then there’s that elephant in the room. You know, the one that’s about T-Mobile buying Sprint. On one hand, the investment into Sprint’s 4G could be simply that-an investment into technology both companies need. But it could also be the first move in a bid to own Sprint Nextel one piece at a time.
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Of course, this slow process of subsuming Sprint is why the Sprint board hasn’t agreed to the T-Mobile offer as yet. There are a lot of people in Sprint’s management that want the company to remain independent. But in the hyper-competitive world of wireless, it’s not clear that remaining independent is even possible for Sprint. Of the four major U.S. carriers, Sprint is the third largest. But when you consider the real size of T-Mobile and its Deutsche Telekom mother ship, there’s no comparison. Sprint is going to have a tough row to hoe to even stay even in this market without help.
It’s also important to note that Sprint and T-Mobile have a long history together. It’s been a few years, but T-Mobile is the company that ended up with Sprint’s GSM network when the latter decided to make the move to CDMA. That old Sprint Spectrum network that looked like it disappeared when Sprint made the changeover actually quietly became part of T-Mobile, and it serviced Sprint customers until they eventually gave up their CDMA handsets.
As part of the process, Sprint and T-Mobile shared facilities for years. I’ve been told by some people at T-Mobile that a few old Sprint sites are still in use by both companies. While this sharing isn’t that unusual-both companies also share sites with the other carriers-it does go back a very long time in wireless terms.
Of course, a purchase of Sprint by T-Mobile wouldn’t necessarily be a seamless process. The two carriers use different voice communications, Sprint with CDMA and T-Mobile with GSM. But Sprint also uses the old Nextel iDEN communications infrastructure for its push-to-talk service, and iDEN is a thinly disguised version of GSM.
So what would happen if such a merger were to take place? Perhaps over the long run GSM would win out, but the real battle these days is for data communications, and if both T-Mobile and Sprint are sharing the same LTE technology delivered by Clearwire, it makes the path much clearer. It may not matter much if the voice services remain separate for a long time. Data is where the money is, and an investment by T-Mobile into Sprint’s Clearwire could open up possibilities for both companies-at least until they become one company down the road.