Industry rumors and a recent article suggesting that some investors may be thinking about pushing for a T-Mobile USA merger with Sprint Nextel. In a world filled with bad investing ideas, the mere suggestion of this happening tops the list of bad ideas.
The suggestion that T-Mobile should merge with Sprint Nextel is an idea in a long list of bad ideas. Do you want a repeat of the original Sprint and Nextel merger? Do you want to see an example of not learning from your mistakes?
Back in March 2008, I had posted on another blog my objection to T-Mobile USA buying Sprint (minus the Nextel piece) for a large number of reasons. I had said; the following (note this was before all of the LTE talk):
T- Mobile’s entire network is based on a narrowband digital technology called GSM; not CDMA.
T-Mobile may have plans on migrating to W-CDMA but don’t fool your selves into thinking W-CDMA and CDMA (CDMA2000, IS-95, EV-DO) are the same because they are not. GSM and CDMA are as different from each other as night is from day. The same can be said of W-CDMA.
To even imagine that a merger between the two could or even should occur in order to “block a price war” is ludicrous. No not ludicrous; STUPID.
This would be a repeat of Sprint and Nextel. The original Sprint and Nextel merger was based on customer acquisition. That strategy made more sense then this new one that is being touted. However, even the Sprint and Nextel merger made no sense from an operational and technology compatibility perspective.
Look if anyone out there is actually thinking that a T-Mobile acquisition makes sense please commit yourself now before you do anymore damage.
The biggest complaint about the Sprint and Nextel merger is the massive operational cost of maintaining two completely distinct and incompatible networks.
So that is what I had noted nearly 18 months ago. Not a darn thing has changed.
Dan Hesse has a done great job with keeping the Nextel brand. However, the reality is he is making the best of a bad situation. In an ideal world, the Sprint Nextel merger should not have happened. When the Sprint-Nextel merger occurred investment bankers were so concerned with balance sheet rollups they failed to realize that carriers with dissimilar networks technologies cannot integrate their networks easily or without spending billions of dollars. You know what they got for their troubles years of Gary Forsee trying to make a go of expensive disconnected and non-synergistic networks. Why would you ever repeat that mistake so you can a few bumps in the stock price?
In short the idea of T-Mobile merging with Sprint Nextel is so bad I cannot imagine anything worse to happen for Sprint Nextel and T-Mobile investors. I will not use the words “stupid” or “dumb” but I will say “ill advised” is how I would describe a T-Mobile and Sprint Nextel merger. Yes you might get a short term uptick in the stock price because the average stock buyer is not conversant in telecom technology. However, long term, the investor is going to pay a steep price.
The best candidate for a merger and acquisition with Sprint Nextel is Comcast.
Yes, Comcast.
Comcast is the ideal candidate to merge with Sprint Nextel. Comcast has a wireless strategy that relies heavily if not entirely upon Sprint Nextel and Clearwire. Sprint Nextel and Clearwire are using WiMAX for their 4G strategy. Comcast knows nothing about the wireless business and Dan Hesse knows everything about the wireless business. Finally, Comcast does not have a wireless network that can create the kinds of technology conflicts a T-Mobile network can cause.