Sprint, Nextel Release Merger Details

• Nextel's iDEN network will take longer than expected to be moved to Sprint's CDMA EV-DO network. The switchover will begin in earnest in 2006 and continue at least through 2008 timeframe.
• The companies indicated they will rely heavily on offering their service to cable companies, who need cell-phone service to fill out their bundle offerings.
• It will take at least a year before Sprint's landline operation can be spun out, eventually leaving the merged company as a pure wireless play.
• The firms will make a big push in VoIP in 2007.
• At a press conference Wednesday, the firms' executives ducked a question as to whether Verizon Wireless might be preparing to make a bid for Sprint. "You'll have to ask [Verizon]," said Gary Forsee of Sprint.
• The background details on the merger had been leaked for several days by investment bankers and lawyers involved in the proceedings, so there were few surprises in the official announcement. The new company will be called Sprint Nextel, with Forsee, currently chairman and chief executive of Sprint, to become president and chief executive officer of the new combined company. Timothy Donahue, Nextel's president and chief executive officer, will become chairman.
• The executive headquarters of the new company will be in Reston, Virginia, while operational headquarters will be in Overland Park, Kansas. The merger agreement is for a $35 billion stock deal, and the combined company will have about 38.5 million subscribers. By combining the third-largest cellular firm (Sprint) with the fifth largest (Nextel), the combine creates a strong number-three firm to compete with the largest wireless company (Cingular Wireless) and the second largest (Verizon Wireless.)
• Verizon Wireless is said to be examining the possibility of making a bid for Sprint. The Wall Street Journal has reported that Britain's Vodafone Group has given its approval to such a plan. (Vodafone and Verizon Communications share the ownership of Verizon Wireless.) There is no great hurry for Verizon Wireless to make up its mind, because it will be at least three months before the shareholders of Sprint and Nextel will vote on the merger.

• Sprint Nextel said the combine plans to spin off as a separate company Sprint's local telecommunications business, including its consumer, business, and wholesale operations. "The local telecommunications business will have its own management team and board of directors, consisting of an equal number of designees from Sprint and Nextel," the firms said.
• "The local telecommunications business, which has 7.7 million local access lines in 18 states and had revenues of more than $6 billion over the past four quarters, will be the largest independent local-telephone company in the United States."
• Faced with selling against the former regional Bell operating companies (RBOCs) and their effective bundle strategies, Sprint Nextel indicated it will seek to fill out cable companies' bundles by giving them the ability to offer wireless capability. "Cable companies are looking for some sort of wireless play," said Donahue.
• In anticipation of the merger, Motorola has taken a beating, as Wall Street analysts speculated that its iDEN network at Nextel will take a back seat quickly, but Donahue said the Motorola-supplied iDEN network still "has a very long life." He indicated that iDEN has a bright future for users in the public safety area. "Motorola will have a long future with Nextel through 2007," he said.
• Nextel is in the process of moving much of its network off spectrum used also by public safety organizations.
• Forsee stressed the positive points in the merger. "Nextel is recognized as a leader in profitability, customer loyalty, revenue per customers, push-to-talk, and marketing to businesses and government," he said in a statement. "Sprint excels in the consumer business and in providing advanced wireless data services and global IP voice and data networks."