Sprint had little choice but commit to Nextel

Sprint Chief Executive Officer Dan Hesse has been trying to sell Nextel since last summer so it could focus on its core CDMA business. According to Moffett, Sprint was even willing to sell at a deep discount below the $35 billion it paid for Nextel in 2005—as low as $5 billion. But while that price may have attracted a lot of prospective interest, raising that kind of capital in the current economic climate is nearly impossible. Considering the drag Nextel has on Sprint’s earnings, Sprint may also have entertained the idea of shutting down the iDEN network entirely and attempting to transition those customers to the CDMA network. Such an effort would be enormously challenging, Moffett said. The iDEN footprint contains more than 30,000 cellsites, each one with a backhaul lease expiring on a different schedule. Shuttering the network on a cell-by-cell basis as those contracts expire would have left gaping holes in coverage for its current customers, while renewing those leases would prolong any shutdown scenario, Moffett said. “Like a slow-motion forced march, the network’s life is extended,” Moffett said, “and so are its operating costs.”

By fully committing to Nextel, instead of looking to unload, Sprint could make some headway in reversing its fortunes. Sprint said it would launch a new Motorola iDEN handset this weekend, the i576, and Research in Motion will have an iDEN version of the BlackBerry Curve available by year end. Eight new iDEN Direct Connect handsets will be released in 2009, Sprint said. In addition, Sprint plans to renew its marketing efforts in Boost Mobile, the youth-targeted prepaid service that has helped offset Nextel post-paid losses. Sprint plans to compete aggressively for customers hit by the current economic downturn and will offer a new Boost unlimited calling plan next year.

The FCC’s extension of Sprint’s rebanding deadline also gives Sprint some breathing room. Although it will still have to invest the capital into retuning its networks’ iDEN base stations, the threat of Sprint being forced to shut down the Nextel network immediately is alleviated. Nextel was originally given a June 26 deadline to relocate its iDEN networks to the top of the 800-MHz bands, replacing public safety agencies that in turn would move into Nextel’s vacated spectrum at the bottom. The rebanding would eliminate interference between interleaved iDEN and public safety radio frequencies by grouping each into separate spectrum blocks. Sprint, however, wasn’t able to meet the deadline because many of the public safety agencies weren’t ready for the transition. Faced with the prospect of shutting down vast swathes of its footprint, Sprint appealed in federal court but lost.