Users welcome consolidation of major wireless carriers

20.12.2004
Von Matt Hamblen

Last week"s merger deal between Sprint Corp. and Nextel Communications Inc. continues a consolidation trend among wireless carriers that could help lower prices and bolster the development of technology for corporate applications, according to several IT managers and analysts.

The planned creation of Sprint Nextel, as the combined company will be called, follows the October acquisition of AT&T Wireless Services Inc. by Cingular Wireless LLC. Sprint and Nextel said they plan to spin off Sprint"s local telephone business in order to focus on wireless and integrated communications services.

John Bolz, vice president of technology architecture at Wells Fargo Services Co. in Minneapolis, said the IT arm of Wells Fargo & Co. abandoned its initial wireless projects five years ago, "when the technology was premature." But Bolz predicted that Wells Fargo will take a renewed interest in wireless applications because of the two mergers.

"These industry consolidations definitely renew the potential we see in wireless," he said. "This is now the opportunity for people to go ahead and make wireless work right."

Bolz said Well Fargo"s financial services and mortgage divisions could benefit greatly from wireless infrastructures instead of fixed networks, since their office locations often are moved. He added that he also would like to explore the use of secure data services on phones that combine Wi-Fi wireless and WAN cellular connectivity.

The 100 or so mortgage officers at Hawaii HomeLoans Inc. in Honolulu have been using Sprint"s wireless data service for three years, and Hawaii HomeLoans has also relied on Sprint for integration help. Leonard Loventhal, the mortgage company"s executive vice president, said that he"s optimistic about the planned merger. "Sprint is very advanced in the 3G (wireless) data field, and that is where we"re most interested," he said. "We"re also hopeful that the larger company can bring better pricing to the table."

Bob Egan, an analyst at Mobile Competency Inc. in North Providence, R.I., said he thinks the formation of Sprint Nextel will push the two largest wireless carriers, Verizon Communications Inc. and Cingular, to make "preemptive strikes" on pricing. Egan predicted that the cost of wireless data services will soon "collapse" to about US$35 for each gigabyte of data transmitted, down from the current average of $63 per gigabyte on corporate contracts.

Craig Mathias, an analyst at Farpoint Group in Ashland, Mass., said he doesn"t expect the mergers to lower prices in the wireless industry. But neither does he expect an increase in prices, despite the reduced number of competitors. The combined companies will be able to take advantage of greater operating efficiencies because they will need fewer capital assets -- including cell towers -- and fewer employees, Mathias said.

Sprint and Nextel expect to complete the acquisition during the second half of 2005. The deal is being billed as a merger of equals, although Sprint is officially buying Nextel in a cash and stock transaction valued at $35 billion.

The merger will bring together Nextel"s iDEN wireless network, Sprint"s CDMA network and a new network based on CDMA EV-DO technology that Sprint plans to roll out next year. Sprint and Nextel officials said they plan to migrate some of Nextel"s services, including its push-to-talk phone capabilities, to the EV-DO network "over time."

Other migration plans will be unveiled when the merger is finalized, they added.