T-Mobile and MetroPCS: Another Sprint and Nextel?
Oct 9th 2012 3:47PM
Updated Oct 9th 2012 4:06PM
Perhaps one of the reasons Sprint Nextel's (NYS: S) board of directors essentially said "nay-nay" to CEO Dan Hesse's secret scheme to acquire MetroPCS (NYS: PCS) last year was their memory of Sprint's inability to make its acquired Nextel network work with its own.
The ill-conceived Sprint/Nextel nuptials took place back in 2005 under Hesse's predecessor, Gary Forsee, at a cost of $36 billion. That deal came in at the bottom of Bloomberg's 2010 list of the 100 largest takeovers in the period 2005 to 2008. By 2010, Sprint Nextel had lost hundreds of thousands of customers and its total valuation, including debt, dropped to $30 billion. All because of serious technological hurdles that were ignored by the suits running the companies.
So, when the man who was CFO of Nextel at the time of the Sprint Nextel merger says the same technical problems exist for T-Mobile's acquiring MetroPCS as were there for Sprint and Nextel making their partnership work, it's worth abiding his words.
"I think it is easier said than done," Paul Saleh told Dow Jones Newswires. "The technology is going to be equally challenging. It has a lot of similarity with Sprint Nextel in many ways."
As expected, T-Mobile doesn't agree with that assessment. "The soundbite that this is a Sprint Nextel do-over is absolutely completely wrong," T-Mobile CEO John Legere told DJN.
From best to wurst
And then there's the possible clash of cultures, corporate and geographical. T-Mobile is a private company owned by the German corporation, Deutsche Telekom. MetroPCS is a publicly traded company based in Texas, run by its outspoken chairman and CEO, Roger Lindquist. Lindquist is the man who didn't mince words when he gave FierceWireless editor Sue Marek his opinion of Sprint's first 4G technology, WiMAX: "No one is touching WiMAX, that's as toxic as it gets."
And sometimes it doesn't, like the struggles Alcatel Lucent (NYS: ALU) has gone through since the merger that put its two parts together. And let's not forget those two unlikely bedmates, Chrysler and Daimler-Benz. Their creation, DaimlerChrysler, lasted nine years -- nine years too long, probably, if you ask executives from either parent.
But, in the end, what will probably determine the success or failure of T-Mobile MetroPCS will be whether or not the engineers can span the technological chasms.
The irony here is that unlike Nextel's incompatible iDEN network -- which Sprint is finally dropping -- the MetroPCS and Sprint networks are compatible. This has not been lost on the Sprint board this time around, as they are now seriously considering another bid for MetroPCS.
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The article T-Mobile and MetroPCS: Another Sprint and Nextel? originally appeared on Fool.com.Fool contributor Dan Radovsky has no financial interest in the above-mentioned companies. Motley Fool newsletter services have recommended buying shares of Vodafone Group. The Motley Fool has a disclosure policy.
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