So Many Reasons Why Deutsche Telekom Won't Buy Sprint

from the pin-drop dept

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

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  1. icon
    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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