Sprint's play for Nextel might force rivals' hands

December 15, 2004|By JAY HANCOCK

SPRINT Corp. is on the bubble. The No. 3 long-distance and cellular carrier is expected as early as today to announce a tentative deal to buy Nextel Communications, the No. 5 wireless phone outfit.

But Verizon Communications is considering breaking up the match by bidding for Sprint, The Wall Street Journal said yesterday. Could Comcast Corp., Verizon's arch-enemy, also be eyeing Sprint?

Analysts I spoke to yesterday doubted that the cable company is preparing a bid. But they said Sprint's fate holds significant implications for Comcast, which reportedly has been seeking a wireless partner, and the company is undoubtedly paying close attention.

Whatever happens, it's clear that tremors caused by Sprint's bid for Nextel and another huge cellular deal, Cingular's recent absorption of AT&T Wireless, have spread beyond the mobile-phone sector.

After three decades of innovation and expansion, first in cable, then in cellular and then in Internet, the telecom business is slowing its growth and consolidating into a handful of giants with long menus of services.

Many consumers don't want to buy broadband, local-phone, long-distance, mobile and cable-TV products from five vendors. They'd rather not buy from three or even two.

Cable companies have figured this out and might be getting serious about buying "wholesale" mobile service from wireless providers and reselling it under their own brands. Top cable vendors Comcast, Cox Communications and Time Warner have been discussing a joint venture to offer such service, industry publications report. If any telecom sector is growing these days, holding out the promise of new customers, it's wireless.

The problem is that much of the wireless business is controlled by the regional telephone companies, who view cable companies the way the Persians viewed Alexander the Great.

Verizon, 55 percent owner of Verizon Wireless along with the British Vodafone, is the former Bell Atlantic. Verizon Wireless is the No. 2 cellular company with 24 percent of the market, according to San Ramon, Calif., research firm Telecompetition Inc. Cingular, No. 1 with 30 percent, is owned by SBC Communications and BellSouth Corp.

Sprint, with 13 percent, is cable's most logical partner. If it gets bought by Verizon or even tied up in a long antitrust review, who else is there? Deutsche Telekom's T-Mobile, with 8 percent? Nextel, at 9 percent?

To be sure, many doubt whether antitrust regulators would allow a Verizon-Sprint marriage, which would give Verizon nearly 40 percent of the cellular market.

"That would be very difficult. It would be huge," said Eileen Healy, president of Telecompetition. Verizon knows that, she added, but it might bid anyway, just to upset Sprint and Nextel's plans and get a look at its rival's books before the Justice Department kills the deal.

A Verizon-Sprint combination would give the unified company 41 percent of the Baltimore metropolitan market, according to Telecompetition. (A Nextel-Sprint merger would produce a 23 percent metro-Baltimore share, No. 3 after Cingular and Verizon.)

Despite the hurdles, investors appeared to give credence to a possible Verizon attempt on Sprint by bidding Sprint's stock up by 66 cents yesterday to $25.10, a three-year high. The interest came despite a statement by a spokesman for Vodafone, its partner in Verizon Wireless, that "we are not in discussions with Verizon," according to wire services.

Comcast, Maryland's biggest cable provider, declined to comment on possible interest in Sprint or the recent reports on the proposed cable consortium to sell wireless service.

But even if it doesn't bid for Sprint, it might work behind the scenes to bolster a possible Sprint-Nextel combination, possibly by signing a deal to resell their wireless time under its own name or that of a consortium, one analyst suggested.

Verizon, Maryland's main phone company, is rolling out cable-TV service in Boston, in Florida and other selected markets to go with its wireless, conventional-phone and broadband Internet services, becoming a one-stop shop.

Will Comcast, which was once an investor in Sprint's cellular unit, move to fill out its menu?

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