Sprint Nextel, the No. 3 U.S. wireless carrier, has been struggling since 2004 when Sprint and Nextel merged. The $35 billion deal is widely seen as a disaster, due to higher-than-expected costs and problems integrating the two companies’ different networks and technologies. Sprint Nextel now suffers the highest churn rate of any U.S. operator, and its stock has slumped 40 percent this year.
In the past week, Sprint Nextel got some more bad news: Its credit rating was cut to junk by Standard & Poor’s, and a federal appeals court affirmed the U.S. Federal Communications Commission’s decision to force the company to vacate 800 megahertz of frequencies by June 26 to eliminate interference with public safety radio systems — a blow that could cost the struggling company $3.4 billion.
The most recent woes make Sprint Nextel, which posted a $29.6 billion loss in 2007, more vulnerable than ever to a takeover, analysts say. So it’s no surprise that rumors Germany’s Deutsche Telekom is interested in buying the company, which first surfaced in March, are once again back in the headlines. Sprint is worth about $22 billion. Neither company would comment on May 5 about the renewed takeover speculation.
Many Players in Possible Scenarios
The combination of the two carriers would give Deutsche Telekom the No. 1 mobile share in the U.S. in subscriber terms, ahead of both AT&T and Verizon Wireless. Sprint currently has just over 20 percent of the market, while Deutsche Telekom’s T-Mobile USA unit is ranked No. 4, with roughly 11 percent share. Being swallowed by a larger outfit like Deutsche Telekom is just one of various possible fates that may await Sprint Nextel. All of them promise to reshape the telecom landscape in the U.S.
There is already significant speculation about potential scenarios. Press reports on May 5, for instance, said…