The merger gives the combined firm the financial muscle and technological advantage to survive and sustain in a fragmented US wireless market.
It's time to reshuffle the US telecommunication league table once again. Close on the heels of the acquisition of AT&T wireless by Cingular in March 2004, Sprint and Nextel announced their merger in a deal worth $35 bn, as on December 15, 2004. Sprint, the third largest long-distance and wireless company will combine with Nextel, the fifth largest player, to form Sprint Nextel. The combined entity, which will boast of a subscriber base of close to 35 million customers, trails just behind Cingular (47 million) and Verizon (42 million). Further, it will be well-positioned in the fastest-growing areas of the telecommunications industry, including mobile data and push-to-talk services, where Sprint and Nextel are innovators in technology, claim the two carriers. The merged entity will be able to offer a broad range of services including wireless broadband to their consumers through their integrated technology platforms. The combine will also have the highest Average Revenue Per User (ARPU) in the wireless industry.
The merger, which is being touted as the merger of equals, is actually the acquisition of Nextel by Sprint. As per the deal agreement, the two companies' shareholders will each own approximately 50% in the new firm, post merger. Nextel shares will be converted into the new company's shares and will be valued at 1.3 times the Sprint Nextel common stock, while Sprint shares will remain outstanding. This includes a small amount of cash per share that amounts to $2.8 bn in order to facilitate a tax-free spin-off of Sprint's local telecommunications business. |
