Report: Possible Sprint-Virgin IPO In The Air
its merger with Nextel Communications,
Also this week, Alltel Corp. was said to be close to acquiring Western Wireless Corp. For several months, the wireless industry has been in a constant state of turmoil. The largest cell-phone service provider--Cingular Wireless--is likely to be challenged for months, as it melds the former AT&T Wireless into its infrastructure.
"I call all this debt consolidation," said Angus Dougherty, president of wireless provider and consultancy Air Cover Network Solutions. "In the next stages, we'll see banks forcing a lot of mergers." Dougherty, former chief technologist of U.S. West's wireless division, said there are pluses and minuses in the mergers and consolidations for both the wireless providers and for their subscribers.
On the plus side, he said, properly executed mergers can result in spectrum advantages. "It can be cheaper to merge to get spectrum than it is to buy it from the FCC," he said. "It's particularly advantageous when a deal gets contiguous bands of spectrum, because they [the bands] can be aggregated together."
As for subscribers, he said constant mergers are likely to mean new contracts and new handsets for users—but at a cost. When improved service or new functions, such as high-speed data, are the result, mergers can be worthwhile.
The Wall Street Journal reported Friday that Sprint and Virgin are considering an IPO. Sprint resells service to Virgin, which has developed a successful formula of marketing, particularly to teenaged users. Sprint is increasingly operating as a reseller of cell-phone service and is preparing to resell its service to AT&T, which will soon be able to use its name after AT&T Wireless disappears into the maw of Cingular Wireless.
Underlying Sprint's moves in the cell-phone area is its commitment to spend $3 billion to build a high-speed EV-DO data infrastructure. "That's a ton of money going into the next generation," said Dougherty.
Earlier in the week, Sprint affiliate IWO Holdings Inc., which provides service in parts of New England, upstate New York, and Pennsylvania, filed for bankruptcy. While Sprint may not be on the hook for any costs in the case, the action demonstrates the lurking dangers in the cell-phone business.
While the Sprint-Nextel merger--Sprint is emerging as the dominant partner--appears resolved on the surface, the consolidation still isn't final. Earlier, reports surfaced that Vodafone Group could make a bid for Nextel, and while the reports have been put down by Vodafone, the issue won't be put to bed for good until the Sprint-Nextel deal is approved by stockholders, which could take several weeks.