Sprint, Nextel Agree To 'Merger Of Equals'

Sprint and Nextel announced Wednesday that they have agreed to a $35 billion merger that will create the third-largest wireless operator in the U.S.

The merged company, which the companies positioned as a merger of equals, will be called Sprint Nextel. The companies said the deal values each company equally and the new board of directors will have six members from each company.

The corporate headquarters will be in Reston, Virginia, the location of Nextel's current headquarters, and its operational headquarters will be in Overland Park, Kansas, where Sprint's current headquarters are located. Sprint's CEO, Gary Forsee, will be CEO of the new company while Nextel's current CEO, Timothy Donahue, will be chairman of the new company.

Sprint's local telecommunications business, which generated $6 billion in revenue last year, will be spun off to the shareholders of the new company, the companies said in a statement. Without the local telecom business, the combined companies would have generated about $34 billion in wireless revenue in the last year. The combined company will have about 35.4 million customers.

In a statement, the executives said the merger will create one strong company out of two previously solid companies. They stressed that the new company will spur competition in the wireless sector; competition is a key factor as governmental regulatory agencies consider the merger."This merger positions Sprint Nextel for greater success than either company could have achieved alone," Forsee said in a statement. He noted that Nextel had a high level of profitability and customer loyalty and was particularly strong in business and government while Sprint was particularly strong in the consumer sector.

"Together, we will be positioned to provide the high-value, integrated communications solutions customers increasingly demand," Forsee said.

"We are confident that Sprint Nextel will generate efficiencies that will benefit customers, shareholders and employees," Donahue said in a statement. While many observers noted that the two companies had incompatible cultures, Donahue said that wasn't the case.

"We share compatible cultures built on traditions of innovation and competitiveness. We will have the resources to develop and deploy compelling, differentiated services by unleashing the combined strengths of the two companies," he said. "This is a pro-competitive combination that will provide customer choice and create exciting new opportunities for all of our constituencies."

Observers also noted that the two companies have incompatible voice systems -- Nextel currently uses an 800 MHz iDEN network while Sprint uses a 1.9 Ghz CDMA network. The companies said that the long-range plan is to migrate Nextel to Sprint's next-generation CDMA EV-DO network.The merger also presumably settles the question of which technology Nextel will use for its fast 3G cellular data network. It previously said it was examining both FLASH-OFDM technology and next-generation CDMA EV-DO technology. Sprint has already started deploying EV-DO while Nextel has said it wouldn't even decide on which technology to use until next year.

The companies provided no timetable for the migration but insisted that merging the networks would save money by requiring fewer cell sites and switches. In addition, Nextel will migrate to Sprint's backhaul capabilities, which also will save money.

The companies said the combined wireless operation will reach 85 percent of households in the U.S., cover all the top 100 markets and will be available in all 50 states.