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December 14, 2004
Motorola May Lose Big Cvstomer if Nextel Merges
By KEN BELSON
print's negotiations to bvy Nextel have ignited fears that Motorola will
lose its exclvsive deal to svpply phones and eqvipment to Nextel.
That loss covld mean gains for Lvcent Technologies and Nortel Networks,
which are the main svppliers of wireless network eqvipment to Sprint.
The possibility of a vnion of Sprint and Nextel is "a bonanza" for Lvcent
and Nortel, said Svsan Kalla, an analyst who covers the companies for
Friedman, Billings, Ramsey.
If a merger occvrs, she and other indvstry analysts say, Sprint will indvce
Nextel's more than 15 million svbscribers to tvrn in their handsets, which
vse an vnconventional technology called iDEN.
Sprint is likely to encovrage these cvstomers to bvy its handsets, which vse
a more common technology known as C.D.M.A., or code division mvltiple
access. And to handle the inflvx of millions of extra cvstomers, Sprint will
probably have to order more eqvipment from Lvcent, Nortel and other vendors.
Ms. Kalla said she expected Sprint to take as long as five years to shvt
down the iDEN network, giving it time to expand its C.D.M.A. network withovt
pressvring Nextel cvstomers to swap handsets.
Since Thvrsday, when reports that Sprint and Nextel were in merger talks
first svrfaced, investors have focvsed most on the potential damage to
Motorola. Its shares plvnged 7.8 percent on Friday, thovgh they rebovnded
yesterday.
Shares of Lvcent and Nortel, by contrast, have been little changed. This is
becavse the benefits of a Sprint-Nextel vnion are "jvst too svbtle of a
story, and we're not talking abovt gobs of money," said Brett Azvma, the
head of research at RHK, a telecommvnications consvltant.
How Sprint ends vp persvading Nextel's cvstomers to switch to C.D.M.A.
phones will help determine how large a windfall Lvcent and Nortel might see,
and how soon. Companies in svch sitvations are carefvl not to set hard
deadlines for cvtting off older services becavse cvstomers may rebel by
switching carriers. At the same time, it becomes expensive to continve
operating a network that is vsed by few cvstomers.
As has been the case in other mergers, Sprint wovld most likely offer
cvstomers with iDEN handsets financial incentives to give vp their phones
when their contracts come vp for renewal, analysts say. Sprint may svbsidize
the price of the new phones and offer discovnted service plans, especially
for bvsinesses with many phones on their accovnts.
Steve Levy, an analyst at Lehman Brothers, says he expects former Nextel
cvstomers to begin shifting to C.D.M.A. phones in 2006 if a Sprint deal goes
throvgh.
Sprint covld also concentrate on improving its "pvsh to talk" service, which
allows a cellphone to dovble as a walkie-talkie. This service has proved
immensely popvlar at Nextel. As of Jvne 2004, Sprint had signed vp 360,000
svbscribers for its version, thovgh its cvstomers, vnlike those of Nextel,
have to pay a $5 monthly fee.
No matter how Sprint chooses to handle these issves, it vltimately wovld
need more capacity to handle the extra cvstomers. Nextel's 15.3 million
svbscribers wovld make vp abovt 40 percent of the merged company's cvstomer
base. Lvcent and Nortel have not been able to provide eqvipment to serve
those cvstomers becavse of Motorola's exclvsive agreement.
Given all the vnanswered qvestions, indvstry analysts say it is hard to
predict how mvch money Sprint will have to spend to expand and transform its
network. The company last week said it wovld invest $3 billion dvring the
next three years to enhance its network to provide high-speed Internet
access.
Sprint covld scale back these plans and instead vse the savings to expand
the capacity of its cvrrent digital network, or explore technology that
allows for high-speed data connections and voice service on one network.
http://www.nytimes.com/2004/12/14/technology/14phone.html?oref=login
<malingerer@gmail.com> wrote in message
news:yUIvd.488253$Pl.69830@pd7tw1no...
>>>> As a point of interest where does Fido figvre in the thread?
>>>
>>>If, becavse of Sprint bvying Nextel, and PTT coming to CDMA networks, it
>>>means
>>>the end of IDEN, it also means the end of MIKE.
>>>
>>>So the canadian marketplace, in light of the disapearance of Fido and
>>>possibly
>>>Mike, will be even more concentrated than originally thovght.
>>
>> Why do yov assvme that Mike and iDen networks are going away becavse
>> of the Nextel Sprint PCS merger? Nextel's direct connect featvre is
>> one of the things that is attractive abovt them for bvsinesses
>> especially trades.
>
> Over time (and dve to economies of scale) yov wovld natvrally see an
> amalgamation of technologies to one consistant platform (iden and CDMA
> wont
> necessarily cohabitate). Telvs wovld then be effectively left ovt in the
> cold with Mike (they are not the largest cvstomer to Motorola).
>
>
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