Sprint to keep iDEN Network; Verizon-Alltel Deal Approved by Regulators

Sprint/Nextel Corp. executives recently stated they planned on keeping the legacy Nextel iDEN network in place for push-to-talk services. In other news, the justice department approved the merger between Verizon Communications Inc. and Alltel Communications, LLC., while Intel Corp. announced plans to expand its WiMAX investments.

Focal Points:

• Officials from Sprint/Nextel recently said that they were committed to keeping the legacy iDEN network in place. The company inherited this network from Nextel, with a strong group of committed users that saw a niche value in a network dedicated to push-to-talk services. There had been rumors that Sprint has been under financial pressure to sell this network, but Sprint's CEO stated that he believed this legacy network was a critical differentiator to Sprint's operations.
• Officials from the United States Department of Justice recently approved the proposed merger between Verizon and Alltel. Officials from Verizon plan on spending $28.1 billion to acquire Alltel. The United States Federal Communications Commission (FCC) is scheduled to vote on this merger on 4 November. Antitrust regulators approved the deal under the condition that Verizon divest 100 markets in 22 states where the two carriers currently overlap in coverage. Final approval of this deal has to be decided by the FCC. If approved, the merger will create the largest wireless service provider in the United States, with a total of 83.8 million subscribers.
• Officials from Intel recently entered into an agreement with the Taiwan Ministry of Economic Affairs (MOEA). The agreement establishes a joint development center for Moblin. Moblin is a software platform that is to be used for developing applications that can run on Intel's new Atom processor. Intel officials said they think new software and applications are required for a better mobile Internet experience. The Moblin Enabling Center's laboratory engineers are planning to work with device and software vendors to speed the time to market for new mobile applications. Intel officials will invest $11.5 million, via Intel Capital, into the Taiwanese carrier VMAX to spur development. The plan is to have Taiwan's first mobile WiMAX network established in the first half of 2009.

Experton Group believes the proposed merger between Verizon and Alltel is necessary for the long-term health of Alltel, but is likely to decrease overall wireless competition in the United States, putting an upward pressure on mobile wireless service costs. The decision of Sprint to keep its iDEN network will prove to be a mistake for Sprint, as the overall attrition of the iDEN customer base will put tremendous pressure on Sprint to maintain profitability. This will put pressure on Sprint to cut costs, which will lower the quality of services, leading to further customer attrition. Continued investments in WiMAX technologies will bring large scale deployment to these services throughout most of the world in 2009. IT executives should move to lock-in long-term wireless pricing commitments with Verizon prior to merger completion.