Carrier affirms commitment to proprietary technology as approval of Sprint deal looms

April 29, 2005

2 Min Read
Nextel Assures on iDEN

U.S. carrier Nextel Communications Inc. (Nasdaq: NXTL) used its first-quarter results announcement yesterday to allay any fears over its immediate commitment to Motorola Inc.'s (NYSE: MOT) iDEN technology, amid hopes that its $35 billion megamerger deal with Sprint Corp. (NYSE: FON) will be approved by August.

Nextel currently runs a proprietary iDEN network developed by Motorola. The combined Sprint/Nextel business will, however, see Nextel eventually migrate its customer base to Sprint Wireless's (NYSE: PCS) CDMA 1x EV-DO network (see Deal Solves Nextel 3G Dilemma).

Speaking on an earnings call for his company’s results, Nextel CEO Tim Donahue stressed that its iDEN network will continue to operate for at least the next three years.

“We are working on a new gateway technology and dualmode handsets, which will facilitate push-to-talk communications between iDEN and CDMA subscribers. Additionally, I cannot emphasize enough that there will be no forced migration of iDEN customers to CDMA… Our plan is to continue to invest in iDEN by developing a high-performance push-to-talk capability on the EV-DO Rev A network in the 2008 timeframe. The bottom line is that we will continue to support iDEN handsets and the iDEN network for several years, because it is a feature-rich, high-quality network with lots of potential applications and target markets.”

Donahue also hinted that the combined carrier may not pull the plug entirely on iDEN once the network integration is complete. “We are looking at several options, including extending the life of iDEN for public safety groups, custom network solutions, and specific business and campus-area subscribers.”

Nextel’s head man is hopeful that the merger will be approved by the Federal Communications Commission (FCC) this summer and will generate cost savings of up to $12 billion. “We have met with the new chairman and several of the commissioners on the subject. I would say they are favorably disposed... We are on a 180-day clock which started sometime in late February, so that would suggest an August approval. We are pushing hard for something sooner than that.”

A combined Sprint/Nextel will serve approximately 43 million subscribers, ranking it the third largest U.S. carrier behind Cingular Wireless LLC’s 50.4 million customer base and Verizon Wireless’s 45.5 million.

Nextel’s first-quarter results saw a slight fall in net profit, while revenue rose 16 percent year-on-year (see Nextel Ups Revenue).

— Justin Springham, Senior Editor, Europe, Unstrung

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