FCC Deal Clears Way For Nextel, Sprint To Merge Spectrum

In the wake of the resolution of Nextel Communications' spectrum problems, the firm's next challenge will be to merge its spectrum hodge-podge into Sprint Corp.'s spectrum. Sprint is in the process of acquiring Nextel.

Nextel accepted an FCC deal for spectrum swap Monday, which the regulatory agency valued at $4.8 billion. The agreement enables Nextel to vacate spectrum used for public safety agencies and move to valuable 1900-MHz bands. The spectrum swap had been vociferously criticized by Verizon Wireless as a "giveaway," but the latter company eventually dropped its complaint.

Although Nextel's and Sprint's frequency bands are different, one wireless expert believes they can be melded together relatively easily. "Sprint already has a substantial footprint that Nextel can roll into," said Joe Nordgaard, managing director of wireless consultancy Spectral Advantage. "It's easy to look at Nextel's new spectrum as a part of Sprint's."

Sprint has announced that it will spend $3 billion in building out a nationwide CDMA EVDO network. The network uses technology developed by Qualcomm, which has supplied similar infrastructure technology to Verizon Wireless. Nordgaard noted that, in addition to its own dedicated cell-phone business, Sprint is developing a business as a Mobile Virtual Network Operator (MVNO) reselling service to cable companies.

With the FCC issue behind them, Nordgaard said, Sprint and Nextel must now deal with a new set of issues, including handset swap-outs, billing integration, and fixing incompatible interfaces. One big feature to be addressed is Nextel's popular "push to talk" feature and how it will fit into Sprint's universe.There is even a possible hitch to the merger: stockholders still haven't approved the deal, and there is a remote possibility they could tie up the combo.

Of the final FCC approval announced Monday, FCC chairman Michael Powell said at a press conference: "It's always gratifying to untangle a knot. I would never have left if this was [not] done." Powell recently announced his intention to leave the FCC.

The spectrum swap deal calls for Nextel to give up spectrum used also by public safety agencies. The company agreed to spend at least $2.8 billion to assist in the relocation of users over a three-year period. Sprint, which is paying $37 billion for Nextel, has said it will assume Nextel's obligations in the spectrum swap.