Surprise Deal: Sprint Buys Velocita Wireless

Velocita Wireless operates the Mobitex-based network that was formally owned by Cingular, and BellSouth prior to that. The Mobitex network is a narrowband wireless network operating in the 900MHz range, and based on 15-yr. old Ericsson technology. Though there is little glamour these days in a 9Kbps solution, it has done a venerable job in the wireless space, powering, for example, 20% of all Blackberrys in the world. The email devices and Mobitex network continued to work while other networks broke-down during Katrina. Today, Sprint surprised us by announcing they had bought Velocita. It a surprise, because there is little synergy, and Sprint already has a lot of complex issues on it’s plate: merging Nextel, merging Nextel Partners, merging affiliates like Alamosa holdings, upgrading to EV-DO, operating iDEN at 800 and CDMA at 1900, owning the major national portfolio of 2.5GHz spectrum (for which they are testing WiMAX, UMTS TDD, Flarion, etc.), AND owning Nextel which has recently made a major deal with the government for a spectrum swap! Why on earth would Sprint want more complexity?! We going to take them at their word: they want access to the spectrum that Velocita owns. The 900MHz channels of Velocita can alleviate some of the short-term pain the over-burdened iDEN is experiencing in the 800MHz band.

Sprint says it will continue to support subscribers on Mobitex. Funny that Cingular rightly sold off its Mobitex holdings and spectrum to Velocita in order to focus on new data technologies like GPRS and UMTS. It didn't make sense to operate competing networks that are near substitutes. So now an other carrier, Sprint, will find itself in the same place. Does it make sense to operate Mobitex, EV-DO, and some future mobile broadband service on 2.5GHz? Probably not. It's, therefore, probably just a matter of time before Sprint takes what it wants out of Velocita, and sells off the rest (including the poor 400,000 subscribers, who get sold off on an annual basis.)


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