So Many Reasons Why Deutsche Telekom Won't Buy Sprint

from the pin-drop dept

Mon, May 5th 2008 4:10pm — Mike Masnick

There's a rumor going around that Deutsche Telekom is thinking about buying Sprint. This is a bad idea for any number of reasons. Deutsche Telekom owns T-Mobile, which competes with Sprint, and which has certainly fallen way behind AT&T, Verizon Wireless and Sprint in terms of coverage and next generation network deployments. At the same time Sprint has definitely faced some tough times recently that have weighed heavily on the stock. So, you could see why Deutsche might initially think about it. T-Mobile is behind in the game, and merging with Sprint could (emphasis on could) jumpstart the business a bit. Plus, it's reasonable to think that Sprint may be undervalued these days. But... it's still a bad idea. T-Mobile and Sprint use totally different network technologies. Sprint is still dealing with the mess of trying to integrate Nextel's iDen system into its own CDMA-based system (which is part of the reason the company has been in trouble lately), and dumping a third totally incompatible technology into the mix doesn't seem wise. You could (again, emphasis on could) argue that Sprint now has some experience merging totally incompatible networks, but so far it's not exactly good experience. All in all, this seems like someone tossing out a suggestion. It's hard to see this as a legitimate possibility.

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Filed Under: integration, mergers, mobile networks
Companies: deutsche telekom, sprint, t-mobile

14 Comments

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Derek Kerton (profile), 5 May 2008 @ 4:27pm

Agree Totally
This rumor is lame. Here's more reasons:

- Deutsche has enjoyed T-Mo USA's profit contributions, year after year. This is a cash cow. Would they choose to replace it with losses?

- T-Mo in the USA has historically been a late-adopter of next-gen technologies, thus keeping their cost basis low. Their brand reflects this, as it is more of a low-cost player. Picking up Sprint and Xohm do nothing for this late-adopter strategy.

- T-Mo recently bought spectrum in the AWS auction, and last week launched their 3G network. They are no longer spectrum-confined. They have a good roadmap to evolve and continue to support their subscribers. 3G will lead to LTE when it is readily available.

- Mike has understated the technology morass that a merger would entail. Deutsche (T-Mo) would be dealing with: CDMA, GSM, EV-DO, EV-DO Rev A, UMTS, HSDPA, Wi-Fi, UMA, iDEN, pre-WiMAX, WiMAX wave 2, and LTE. I'm just waiting for someone to say "synergy" so I can laugh.

- Sprint has no synergy globally with T-Mo, thus no scale economy advantages. Sprint and Deutsche have different 4G evolution plans, and Sprint has already invested heavily in theirs. There is no frequency scale advantages, either.

- As Verizon finally gets in line with Vodafone for LTE, do you think T-Mo wants to inherit the "US subsidiary that doesn't fit" problem?

- Deutsche Telekom does not have a WiMAX-friendly culture as an incumbent cellular operator in many markets. Xohm is entirely a foreign idea to this culture.

- Sprint's shareholders have been pummeled by poor performance, and by Xohm. Would you want to buy this?

- If T-Mo wanted to be aggressive with 4G, wouldn't they just have bought spectrum and done it themselves? Yet they were NOT aggressive, because they are happy with their current roadmap.

I think T-Mo USA is content with focusing on the 3G deployment for now. This division has never been in a rush to adopt the fastest or best technology, yet they have been cautious, late movers...and very profitable. Don't fix it if it ain't broke.
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Anonymous Coward, 5 May 2008 @ 5:29pm

Technology is only a minor bump in the road.

Keep driving.
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- Anonymous Coward, 5 May 2008 @ 8:42pm
  
  Re:
  Agree you very much.
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Anonymous Coward, 5 May 2008 @ 5:51pm

Maybe if a company buys Sprint, I'll get the last 16 bills that failed to arrive despite 10+ calls to customer service!

I've tried email billing too. I don't get those either. I DID however get letters and emails notifying me that my deposit has been credited to my account for paying on time, and another letter for my spending limit getting removed.

Fuck Sprint.
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- Anonymous Coward, 6 May 2008 @ 6:30am
  
  Re:
  The comment is a little unprofessional for my taste.
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Anonymous Coward, 5 May 2008 @ 8:10pm

There may be a good reason for DT to buy sprint, BECAUSE of all the different technologies!!!
Ideally, they Buy sprint/nextel. They then break nextel back into its own unit. They not run three separate operations, each marketed to a distinct group:
T-mobile to low end users who don't need hi data, just want cheap and reliable. Sprint is high end, fast, direct competition to verizon, etc. Nextel goes solely for the business and commercial user who needs the old nextel phone to phone direct thing.
If they could Synergize the common elements, billing, support, sales, they may have something. or maybe not....
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Blake Mitchell, 5 May 2008 @ 11:24pm

A bit narrow minded
I disagree, and believe now would be perfect timing for such proposal. read my thoughts at http://digitalnauseum.blogspot.com on why. I do not feel like retyping them.
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- Here you go Blake, 6 May 2008 @ 12:11am
  
  Re: A bit narrow minded
  "I do not feel like retyping them."
  
  Here you go. This should help:
  http://humboldtherald.files.wordpress.com/2007/10/ctrlc3.jpg
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Snidely, 6 May 2008 @ 3:39am

Look below the surface
The comments about the mess of technologies are right on, but there may be a deeper interest from DT. Contrary to what one of the posters said about frequency constraint, T-Mobile is constrained with a limited amount of 1900 MHz. Yes, they did get 1700 in the AWs auction, but that's for 3G and virtually no current devices support that standard. Sprint has a ton of 1900 MHz spectrum from its own holdings plus the swap proceeds that Nextel got by moving off the 700 Mhz band. Here's what I would do - buy Sprint just for the 1900 spectrum, spin off Xohm (not in DT's roadmap) and offer free handsets to Nextel subs who move to T-Mobile. Nextel customers already have SIM cards, so it's just a matter of the T-Mobile billing system recognizing the Nextel IMSI range (yes, I realize that is more difficult that it sounds). I would just allow Sprint to play out the CDMA Rev-A cards, but not invest in the network, pushing customers onto T-Mobile for 4G LTE. Still a gamble by DT, but it could have some potential if DT is really trying to challenge AT&T/Verizon and not be content to be the low-cost 4th player.
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Rafael A. Junquera, 6 May 2008 @ 3:48am

LTE
Although it is a rumor, this should be viewed with a more global context than just the technologies involved in merging both operations in the US. DT wants to increase it world importance and in the long run, about 2015 have all its operations under a single technology, possibly LTE. There aren't many opportunities out there for this mega groups, which, as we know, do not buy assets based on technology but rather on how they may impact their future balance sheets. If it is true that the current share of Sprint and the strong euro are so favorable then it makes sense to DT based on their thinking. That being said, Telefonica could also be interested or France Telecom, a great entrance to the US market, don't you think?
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Anonymous Coward, 6 May 2008 @ 10:09am

Reason #42: Quest MVNO service just moved to Verizon.

http://www.wirelessweek.com/Qwest-Switches-Verizon-Wireless.aspx
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Woadan, 6 May 2008 @ 5:13pm

I would have thought that Verizon Wireless would be much more interested in Sprint than DT/T-Mobile. At least their wireless networks are currently running on the same technology.

At the same time, Verizon has successfully merged several telcos, starting with NYNEX (while still Bell Atlantic), then GTE followed by MCI.

For that matter, I've thought for some time that Qwest was ripe for a Verizon bid as well. And Qwest just announcing that they were switching from selling Sprint wireless in favor of Verizon Wireless might be a bellwether.

With the FCC favoring telcos, it might be a shoe-in from that angle, either one.

Woadan
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Jim A, 9 May 2008 @ 9:12am

DT cannot buy Sprint
Point #1: Our Government would not allow any foreign entity to own spectrum in the US.
Point #2: SPrint would have to divest itself of all its License spectrum and so would be of virtually no value to DT
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Cruzzer, 10 May 2008 @ 1:45pm

To Comment 13.. LOOK WHO OWNS The Mariners
You said Point 1 that "Point #1: Our Government would not allow any foreign entity to own spectrum in the US." but First of all.. Look who owns the Seattle Mariners.. The Japanese.. Just because you own "Majority Stock" does not mean you own "Controlling Stock" and vice versa..
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