Sprint Nextel (S) has been thinking about unloading its underperforming Nextel walkie-talkie business for months, after writing down most of its $35 billion purchase price. And according to the WSJ’s Amol Sharma, they’ve gotten multiple bites: Latin American carrier NII Holdings (NIHD), which operates similar networks, and several private-equity firms. But any deal to buy Nextel with Sprint comes with several hurdles, which Sharma details:
- Sprint has spent the last several years working Nextel’s back-end systems like billing and customer service into its own. So some major surgery would be required to separate the services.
- Sprint might not be able to guarantee $5.4 billion in debt., which Sprint wants a potential buyer to assume.
- The credit crunch has made it tricky for potential buyers to get money. (Something that’s also plagued Sprint local-phone spinoff Embarq’s (EQ) M&A plans.)
Sounds about right to us. But we’d add another one: Sprint is already building a new, different walkie-talkie network that uses a different wireless technology and different phones — which would compete with a sold-off Nextel.
Specifically, Nextel’s current network uses a Motorola (MOT) wireless technology called iDen, which NII Holdings also uses in Latin America. But Sprint is also rolling out a new walkie-talkie network using the (separate) Sprint data network, which uses a Qualcomm (QCOM) wireless technology called QChat. Earlier this year, Sprint said it planned to have QChat rolled out on 80% of its network this year.
We suppose it’s possible Sprint might sell its Nextel buyer its exclusive U.S. licence to use QChat — but it can’t just sell it the whole QChat service, because that’s operating on the network Sprint uses for its main mobile phone/mobile Internet service.
So if someone does buy Nextel, and keeps selling walkie-talkie service in the U.S., it will probably have to compete with Sprint for its own customers.
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