Integration is one of Sprint Nextel Corp.’s biggest challenges this year as the company continues to digest its multiple mergers-ranging from the former Nextel Communications Inc. to various PCS affiliates such as Nextel Partners and Alamosa Holdings Inc.-and gobbles its remaining affiliates, such as Shenandoah Communications and Ubiquitel.
“Our integration is off to a very fast start,” Chief Operating Officer Len Lauer told analysts during a conference call last week. “We still have much to do, but we’ve made great progress.”
Sprint Nextel spent $965 million on merger costs in 2005, and realized $730 million in operating and capital expenditure synergies, company officials said.
The carrier has been working to smooth out a number of its business segments. For customer care and billing, last year Sprint Nextel selected Amdocs to be its single vendor. The carrier said it plans to begin the first phase of customer-care and billing migrations in the third quarter. The transition process is expected to last until the end of 2007 and save the company $375 million during the next three years.
Sprint Nextel also plans to trim its work force of about 60,000 by about 2,500 jobs by the end of the year as part of the $14.5 billion in merger synergies it promised Wall Street. Overlapping positions will be cut, while new positions will be created in growth areas such as Voice over IP and the carrier’s recently announced joint venture with several cable companies.
The company also said it will reduce the number of retail stores it operates by closing between 160 and 170 low-performing and overlapping locations, bringing its overall number of retail locations to about 1,600 stores and kiosks.
Besides the significant work on operational integration, there is work on the network side under way as well. Lauer said that the company has been migrating Nextel network traffic from other interexchange carriers to Sprint Nextel, and indicated that Sprint Nextel expects to renegotiate about 1,000 cellular tower leases by the end of 2006 to reduce its lease costs. The carrier also has slashed the number of handsets in its repertoire by more than 30 percent, from 65 devices available at the close of the merger to around 40 today, Lauer added.
Sprint Nextel plans to have a dual-mode phone available for consumers later this year that will use iDEN technology for push-to-talk and CDMA for voice and data services. To this point, Sprint Nextel has indicated that it will continue to maintain the Nextel network through at least 2010.
“It doesn’t mean that there is a sunset at 2010, that the light switch is going to go off,” noted Ali Tabassi, Sprint Nextel’s vice president of innovative technologies. “We continue to make network investments.”
However, the company declined to give specific numbers on how much of its network investment is in its CDMA network vs. its iDEN network. Tabassi noted that Sprint Nextel is trialing EV-DO Rev-A services-which promise to support PTT services with speeds comparable to iDEN-and plans to launch services in some markets in 2007, with nationwide availability in 2008.
Tabassi said that while there will always be natural migration between the networks, Nextel customers who might consider switching service “are looking for comparable and proven and tested technology to change to,” and that it will be some time until “the new network is there, it meets their demands and their needs.”
Tabassi compared Sprint Nextel’s position on iDEN to the industry’s historical technology transitions, noting the long transition away from analog-and the fact that carriers still have active analog technology in certain areas of the country, as an example.
“It is the customers’ needs that we are going after. If the customer believes that there is a value for them to continue using iDEN even after we introduce the next generation, and there is enough business for us to maintain it, we will continue to maintain it,” Tabassi said.
Sprint Nextel officials said the company will address its future direction in more detail March 7 during its analyst day.
