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Optical/IP

Three-Network Pileup

6:00 PM -- Verizon Communications Inc. (NYSE: VZ) will report its third-quarter numbers at the end of this month. If the company's wireless arm shows anything like the growth enjoyed by rival Cingular Wireless , which reported today, the chatter about a possible merger between Sprint Corp. (NYSE: S) and T-Mobile US Inc. will become ever louder. (See What's Next for Sprint Nextel?)

Analysts are already suggesting that it will be difficult for Sprint and T-Mobile -- the Nos. 3 and 4 U.S. operators, respectively -- to keep pace with the Big Two. (See Cingular's Subs-stantial Quarter.) Several things could also potentially block such a merger -- from regulatory issues to the desire of T-Mobile's parent company, Deutsche Telekom AG (NYSE: DT), to keep hold of its American assests.

If there's one thing that should stop such talk dead in its tracks, however, it's the thorny problem of combining not two, but three, underlying cellular network technologies. Sprint is already grappling with the cost and complexity of combining its CDMA network with Nextel's iDEN technology. (See Sprint Nextel Reports Q2.) Adding T-Mobile's GSM and its 3G offshots to the mix could make an already tough nut impossible to crack.

Consider that it's taken Cingular two years to completely merge AT&T Wireless's GSM network with its own, which is largely based on the same technology. Just how long would a three-way network merger take?

Add to this the additional expense of triple-mode devices, and you can see that a Sprint/T-Mobile merger might end up being more trouble than it's worth -- even leaving aside, for the moment, Sprint Nextel's plan to introduce a mobile WiMax network in 2008. (See Sprint Goes WiMax.)

A merger like this is a financial wonk's dream and an engineer's nightmare. It'll never work on anything other than PowerPoint slides.

— Dan Jones, Site Editor, Unstrung

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