News September 23, 2009

Opinion – How Realistic is a Sprint with T-Mobile Merger?

Over the past few days, I’ve been reading a lot on the rumors related to a Sprint/T-Mobile merger. Honestly, I was really surprised when I initially heard this. From a business point of view, it makes tons of sense; but from a technology point of view, it really has me scratching my head. Let’s stop and take a look at this for a moment…

From BetaNews -

Sprint has steadily lost more than a million postpaid subscribers per quarter for the last two years, but it has proven to be highly successful in the prepaid mobile market, gaining a record 777,000 prepaid customers in the last quarter alone. These gains, coupled with Sprint’s acquisition of MVNO Virgin Mobile USA (and its 5.38 million subscribers) made Sprint the United States’ second-largest prepaid wireless operator with nearly 10 million customers.

T-Mobile’s gains in the United States have also been mostly prepaid customers. In the most recently completed quarter of this year, T-Mobile added a net 325,000 subscribers, and nearly 83% of those were prepaid.

I saw an interesting article on The Telegraph where DT CEO René Obermann swears upside down, backwards and sideways that he’s going to turn around company performance of both T-Mo UK and T-Mo US. The business sense of the merger is dead on…as far as prepaid is concerned. And honestly, with Deutsche Telekom’s vast resources, they may actually be able to pull it off…in the long run. The short term, however, plans to be a bit of a train wreck from my perspective.

Sprint runs on a CDMA network, just like Verizon Wireless. T-Mobile runs on a GSM network just like Orange, AT&T and nearly every other cell carrier in the world. There are only a few other carriers that run on CDMA in the world; and most of them are are in Asia (aside from Verizon Wireless and Sprint in the US)…and this is where the problem comes in. If Sprint and T-Mobile do merge, how will they reconcile their disparate networks? Will one carrier switch to the other’s format? Let’s consider that for just a moment…

Deutsche Telekom’s global network runs on the GSM format, and it is unlikely that they will sell off their US GSM towers and convert T-Mobile USA customers to CDMA. Sprint’s network is nowhere near big enough to handle the influx of 5.38M Virgin customers, and (a somewhat) projected 2.8M new prepaid customers of their own (777k customers * 4 quarters). That’s 8.18M prepaid customer’s on Sprint by the end of this calendar year alone, and we haven’t even touched Sprint’s post paid customer numbers, let alone T-Mobile’s pre and post paid numbers. I have no idea what their combined numbers are, but again, it’s substantial (even if declining). In many areas, as I understand it, Sprint rides on Verizon Wireless towers, making use of their network to help even out some of their coverage.

T-Mobile employs the same kind of roaming agreements with AT&T to help even out their coverage; and to be quite honest, they haven’t done nearly as good a job of that as Sprint has… Even in as densely populated an area as Chicago, T-Mobile coverage really just stinks.

So, if neither network infrastructure is strong enough to handle the influx of the multiple millions of customers that are likely to find themselves with a new carrier, you would think that one is going to have to switch to the other format/network. THAT is the train wreck I mentioned. Those of us who were (old) AT&T Wireless/Cingular TDMA customers will remember the amount of grief we experienced when Cingular converted everyone off of TDMA and on to GSM. Calls got dropped, phones didn’t ring, voice mail evaporated, coverage was spotty, rivers and seas boiled, there was 40 years of darkness, dogs and cats lived together… in short (come on, you know what’s coming next…) mass hysteria!

Seriously, it was an experience that I hope I never have to repeat again; and that was just a network change on a single carrier. Just think of what will happen to service for users of the transferring network, let alone the customer service disasters that are likely to develop for customers of BOTH carriers. The process will take quite a while to plan and will require a GREAT deal of coordination and effort to insure that things don’t turn south; and is likely to generate a GREAT deal of press (and likely, not all of it good).

From a business perspective, this seems like a really great idea. However, I think that DT really needs to take a long hard look beyond the financials and see how this might affect wireless customers from both carriers. They will need a number of different project managers, someone with a great deal of organizational skills and savvy to head this up (as well as a good stage presence and poker face). They will also need to figure out what areas of their network to build out first, as they receive the influx of new customers… and don’t get me started on how they are going to handle the handset swaps… That’s gonna be painful.

I haven’t seen or heard a lot on the logistics of the deal, post merge; and while it still may be early, its just too big not to have someone on now (I mean RIGHT NOW) to determine the most likely points of failure, so that proper plans can be considered and costs projected before risk is assumed.

What do you think? I’d love to hear what you have to say. Why don’t you chime in below and share your thoughts.

Tags: Mobile Phones, Sprint, T-Mobile

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About Christopher Spera

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http://www.s-consult.com/index.php Wayne Schulz

Well Sprint figured out how integrate Nextel pretty well. What makes you think they couldn’t do the same with T-Mo.

That was a joke – just in case.

Yeah, this would be a disaster — if there’s one lesson to be learned from prior cellular conversions is that incompatible core technology will be almost an insurmountable hurdle.

Also, I think Virgin’s already owned by Sprint and was always renting space on their network so I am not sure the prepaid would flood them — but trying to integrate T-Mo might capsize them…
http://www.geardiary.com Michael Anderson

Whew … as someone who had Nextel during the merger, you had me going for a minute there …!
stevenshytle

While Sprint is a cellphone company I believe they sold off all their cellular towers. Switching tower technologies is a lease arrangement now. Also the new Sprint HTC Touch Pro 2 while it is a CDMA phone I think it has a worldband GSM slot also. Seems like a transition could happen with proper planning.
nosmohtac

I think this would be an awesome merger. It just makes sense. I don’t know how they would tackle the technology difference, but it doesn’t seem unsurmountable.

There have already been tests with LTE (seen as GSM tech.)handing off to CDMA for voice, which is what VZW is supposedly going with. Add to that the Clearwire recently stated that if WiMax doesn’t pick up enough support around the world that they can switch (to LTE I assume) with only a software upgrade.

There are already phones on VZW, Alltel(yes they’re still around in some markets), and Sprint that have GSM radios, meant for world business travelers. Wouldn’t it be possible to have OEM’s manufacture phones that have CDMA and GSM Radios that support T-mo’s frequencies? I’m not sure, but I would love to see this happen. T-mobile and Sprint don’t have the widest coverage, but they have the most competitively priced post-paid plans out there.
http://www.grabaclue.com/perry Perry

I think nosmohtac has it right: LTE is the answer that would make this merger possible. Although Sprint has committed to WiMax with Clearwire, they could still fairly easily change to LTE, or commit to both; WiMax in urban areas and LTE elsewhere. I’m not an expert on the technologies, so I don’t know if running both necessarily makes sense.

The point is that they could continue running CDMA and GSM and whatever it is the Nextel phones are running (I don’t remember what it’s called) for the time being, while working to converge the networks on the 4G standard. Personally, as a Sprint customer, I’m a little leery of their plans to go with WiMax considering that Verizon and AT&T and most of the rest of the world are going with LTE. WiMax sounds like it could be technological evolutionary dead-end.
justmac32

How about slowly migrating the sprint base to GSM as they mature past contract dates, while pushing the CDMA network towards MVNO’s. The Clearwire WiMax could be converted to LTE which T-Mobile would use as their main data technology. Also, all the MVNO’s could have a open network to operate (CDMA) on. Then T-Mobile can capitalize on both the Prime customers on GSM from Sprint and the revenue from the customer traffic the MVNO’s pay for on CDMA.

Would the Feds go for this?