Sprint will sell Nextel...gets rid of IDEN technology.
Cut & Pasted from the link I posted a few minutes ago...
FROM THE I WANT THE DEUTSCHE BANK MRC0516 FILE! THREAD:
Deutsche Telekom's T-Mobile Division (with 11 to 12% of the U.S. market) CANNOT SURVIVE unless they merge with Sprint in order to have a larger subscriber base.
In the current cellular phone market, cutting prices to match your competitor (Sprint subsidiaries Boost & Virgin Mobil) only works if you have enough of a subscriber base to make up for it (the lower margin) in terms of volume. Why? Because the cellular phone service provider business entails tremendous fixed costs...network and advertising. If those huge fixed costs have to be spread over a lower subscriber base than your competitior's subscriber base...your competitor (Sprint) can put you out of business. You can't match their lowered pricing plan because to do so would result in INCOME (the new price plan $ per month X your too low of a subscriber base) that would not leave enough margin after subtracting your costs...a large portion of which are FIXED. (network & advertising) as opposed to VARIABLE. (costs that are related to the number of customers...e.g. handsets, number of store employees, etc)
Now add the fact that in order to survive in the coming 4-G (mobile t.v., quality video, faster transfers of files, pictures, etc) world...T-Mobile HAS TO ACQUIRE SPECTRUM (radio frequency rights)....
So...T-Mobile has insufficient spectrum/badwidth to compete in the coming "4-G World" and all they can do is proclaim that they are proceeding with an aggressive roll-out of 3-G??
And how will a discounted pricing plan...
(as if they could afford to do that...given the "economies of scale" facts above)
...get them anywhere? Why would smart phone users go for it...given T Mobile's deficient 3-G network and NON-EXISTANT (with no spectrum to plan with) 4-G network.
T-Mobile's 2nd Quarter 2009 revenues were less than 2nd Quarter 2008 revenues. This was the 1st time (declining quarter to quarter revenues) since Deutsche Telekom acquired them. What caused it? The advent of smart phones (not good for a company with a deficient 3-G network and no spectrum to run 4-G ) and the price-plan squeeze from Sprint's Boost Mobile (a large part of T-Mobile's customer base is the prepaid market), Metro PCS & Leap.
WHAT'S THE SOLUTION?
Acquire Sprint for their customer base (see accounting discussion above) and NETWORK!
Buy Sprint now while the Sprint price per share is low and the Euro is on a roll against the dollar.
Assimilate the different technologies (Ericsson), finish the 4-G expansion,
pay off the debt securities as they come due...with inflated dollars...and once the network expansion is complete...it's a CASH COW.
What caused Deutsche to decide to acquire Sprint now after looking last year and failing to complete a deal?
Answer: The availability of M&A capital, the Sprint share price, the current value of the Euro against the dollar (takes a $1.4779 to buy a Euro today), AND THE DECLINE IN T-MOBILE 2ND QTR REVENUES AS COMPARED TO 2ND QTR 2008...1st quarterly revenue decline since D.T. acquired T-Mobile in 2001.
Yes, this move has S merger written all over it. I mean how does spinning off T-mobile make sense as a stand alone. It will struggle just as it struggles now.
So this raises money that can be used, as you said, in regard to creating the new entity, the question becomes what is the structure?
Is it a JV? What structure do we end up with?....and what does it mean for pps? or new shares in a JV?
If a JV, what goes into the JV from Sprint, maybe they (sprint) spin off just their post-paid into it...can't put gov't biz and iden under DT control, and wouldn't think they want to spin away m2m and smart grid stuff...... and the spectrum is too valuable to part with....
What I can see would be S putting the Smartphone/post paid part into a JV for cash and stock and providing 4G access in some favorable arrangement, DT brings the iphone to the mix (as in Europe) and their customers of course......that would create a monetization event for shareholders and probably some new shares in the JV.....but most of S stays intact, and S holds some position in the JV.....ie. there's still alot left as in m2m, smart grid, gov't biz, iden, prepaid.....
this goes back to past discussions about S as a holding company sort of structure......
anyway that's just off the top of my head, what do you think we'll see?
Looks like you may have been right all along...you were the biggest proponent that a merger was coming....this is definitely a major development.....certainly gets one wondering...