Sprint-Nextel Merger Stirs Channel Concern

Agents, in particular, are always concerned when telecommunications companies merge because it almost certainly means their commissions for representing services from those carriers will be adversely affected, said Bob Loftus, co-owner of Linksource Communications, a telecom agent firm in San Francisco. Agents sell branded telecom services but do not own the contract with the end customer, as VARs do.

"What scares the agents is what's going to happen to [their] commission stream," he said. "If that's not clear, those agents are going to move those customers [to other carriers]."

But which carrier to turn to? Emmet Tydings, president and CEO of AB&T Telecom, a Gaithersburg, Md.-based master agent and national service organization, said the terms of agent contracts from the major telecom carriers--including Sprint, AT&T, Qwest and MCI--have all become less lucrative over the past several years.

"Right now, in the month of December, all of the large carriers have new contracts on the master agents' desks," Tydings said. "The contracts for 2005 aren't as good as the ones sitting there in 2004,and the ones in 2004 weren't as good as the ones in 2003."

The consolidation triggering these changes is nothing new. While the Federal Communications Commission broke up the legacy Ma Bell system in the late 1990s to spur competition, most of the Baby Bells have since merged either with one another or other companies.

Before Sprint and Nextel announced their plans to merge, Cingular Wireless, a joint venture between Baby Bells BellSouth and SBC Communications, purchased AT&T Wireless Services. Cingular is now the largest provider of wireless services in the United States. And Verizon, a close second, is rumored to be mulling a bid for Sprint.

The combined Sprint-Nextel will become the third-largest wireless provider behind Verizon, with about 39 million wireless customers and one of the most robust wireless service portfolios in the market.

"If you look at what the customer gets, it's the most interesting marriage out there for cellular users," Tydings said. "From full personal information manager services to two-way messaging and talking with all of that and regular cellular services, it's exciting what could happen from a technology perspective."

Steve Moody, executive vice president of the telecom practice at Solarcom, a Norcross, Ga.-based systems integrator, said the Sprint-Nextel union will benefit enterprise customers who buy large voice/data contracts through VARs. Sprint is the only carrier that allows cellular usage to count toward those contracts, Moody said.

"This is important because the higher spend you have, the lower rate you get in other areas [of service]," he said. The union of Sprint and Nextel could give Solarcom's enterprise customers a richer set of wireless services at a better price as part of those contracts, he said.

Dana Chase, vice president of indirect sales for Sprint Business Solutions, said Sprint plans to continue with its current channel strategy.

While last week's pact bodes well, further consolidation--such as the rumored Verizon-Sprint deal--could spell disaster, partners said.

"If Verizon was to purchase Sprint, that would accelerate my plans to move toward a pure reseller [model]," Tydings said.

Most telecom carriers and wireless providers have never done a good job of partnering with the channel, solution providers said. It will come as little surprise if this continues to be the case, they added.

"I haven't seen good business wireless programs that we can sell as agents to the business community," said Christopher McGuigan, president of The Beacon Group, a Verizon partner and telecommunications solution provider in Morganville, N.J. "It is still very retail-oriented."

Verizon agents have expressed an interest in selling wireless services to business customers, McGuigan said, but the carriers haven't delivered viable programs to support this.

"None of [the carriers] have a stellar reputation with the channel," agreed Jeff Shilling, president of solution provider Oasis Technologies, Oklahoma City, Okla. "Telecom services have been driven by the solution, not the carrier. The carrier has just been a necessary component we have to deal with."

Cingular declined to comment on the partner implications of the Sprint-Nextel deal. Verizon could not be reached for comment.

STEVEN BURKE contributed to this article.