What a Mess! Deutsche Telekom ponders Sprint Nextel and a Wireless Wasteland

Implications: Buyers beware is an understatement with Sprint Nextel.  They have so many gashes in their underbelly that I have difficulty seeing how they could be a worthwhile acquisition, unless the price drops much further.  T-Mobile is not in a powerful position in the market, and combining the two seems more foolhardy than a power move.

Analysis:

No one ever said that vultures were wise.  A spokesman for Deutsche Telekom says:  "We would be bad businessmen if we didn't take a look at Sprint, given the recent decline in the company's share price and market value.  I am sure we are not the only ones making these calculations now."

And perhaps, Deutshe Telekom, you would be “bad businessmen” if you added CDMA and iDEN to GSM?  Or perhaps you would be “bad businessmen” if you combined the two bottom-of-the-barrel wireless carriers in an attempt to fight Verizon and AT&T? 

GSM + CDMA + iDEN = yicccch

Sprint purchased Nextel several years back with the belief that they could utilize the strength of both networks to deliver a stronger network – integrating and upgrading networks, unifying billing systems, combining credit qualifications etc.  Well, this promised integration never happened.  The iDEN network slipped in quality as attention focused on integration as opposed to maintenance, load balancing, and so on.  The advantage that Nextel had with the Direct Connect offering and the minimal impact it had on its network slowly slipped away.  Today, the two networks are disparate and so is the brand.

What makes Deutsche Telekom think that a third network in the mix wouldn’t be a complete nightmare?  Would it be possible to scuttle both networks and attempt to bring everyone into the GSM world?  Could they possibly provide customers with a worthwhile customer experience?  And how about combining billing and credit scoring?  What would they do with the legacy networks?  Enough to make your head spin? 

Two Wrongs (T-Mobile and Sprint Nextel) Don’t Make a Right

I admit to having a sour view of Sprint Nextel.  They have the bottom-of-the-barrel customer category, as their low end phones with poor credit profile customers put the company in a very bad position.  Their customer base has been declining due to the these elements, and more, and there is no reason to expect a healthy turnaround.  The only positive part of Sprint is their data network, and it has also been underserved, now only a partnership called Xohm that will likely spin-off.  The talent at Sprint is weak, so, sure, it might make sense to aim for efficiencies via layoffs, but I view Sprint as a declining giant just attempting to suck the last dollar of a weakened wireless base.

As to T-Mobile, they also have a weak offering, generally attracting customers in spots of the country where their coverage is strong or, more likely, attracting customers to attractively-priced plans.  With a few exceptions, they cannot compete with AT&T on handset assortment, nor can they compete with Verizon.  And their data offerings also pale to the big two.

Growing market share, if the market share is weak, is a dangerous play.  It is vital to get under the covers and understand the true brand.  I fear that few “vultures” can really understand the true Sprint and thereby maximize a merger.