Sprint-Nextel - a Merger Example

Sprint is having huge problems in the face of the merger with Nextel and the spinoff of Embarq (the local phone service). Chief among the problems is demonstrated by "a net loss of more than 300,000 monthly subscribers during its fourth quarter." According to Forbes:

Horan removed his target price, which had been $22. He said he expects the company to see difficulties winning back market share from rivals Cingular Wireless and Verizon Wireless, as the two are "locking in customers now with two-year contracts and almost 70 percent of subscribers on family plans and many of the others on enterprise plans."

This is th esame problem Alltel, T-Mobile and every MVNO are facing. You can not convert customers locked into a contract.

The bulk of the subscribers leaving are Nextel customers, frustrated by continuing service problems that the company blames partly on technology issues and analysts say are a signal that the Sprint-Nextel merger of August 2005 is far from complete....When Overland Park, Kan.-based Sprint said in December 2004 that it would acquire Nextel Communications Inc. to create the 3rd largest wireless provider in the country, industry observers predicted it could be a good marriage. Nextel enjoyed great loyalty from construction crews, taxi companies and other businesses that liked the company's press-to-talk feature, while Sprint built itself as a leader in developing content for the consumer market.

This is what the analysts say to EVERY merger:

"On paper, (the merger) didn't look too bad and it maybe made some sense," said Greg Gorbatenko, a telecommunications analyst for Jackson Securities. "But the digestion of that was just horrible."

Hogwash. Short term it helps all th einsiders: the banks, the executives, the directors, the stockbrokers. But long-term it screws stockholders, employees, customers, and America.

Since the deal's consummation, however, the company has fallen behind its competitors as it struggled to blend the two corporate cultures and assimilate a host of acquired affiliates. It's also been criticized for a marketing plan that experts said has ignored the different desires of Sprint and Nextel customers.

We'll just save this article for next year when the at&t-BST merger fails to gain anything. Even the VZ-MCI merger is still experiencing growing pains, which will stall its real revenues --- although you'll hardly be able to find that in the press releases or stock reports.