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Sprint, Nextel Talking Merger?

Sprint and Nextel are in talks to merge into the third-largest wireless phone carrier, according to a report by the Wall Street Journal Friday.

Spokespersons for Sprint and Nextel had no comment on the story. According to the WSJ, the merger would top $30 billion and consolidate 75 percent of the mobile carrier business under three companies -- Cingular Wireless, Verizon Wireless and Sprint/Nextel.

The possible merger of the two companies comes nearly a year after Cingular Wireless -- the BellSouth and SBC joint venture -- and AT&T Wireless began merger discussions, which came to fruition last month after the Department of Justice (DOJ) approved the $41 billion deal.

The Cingular acquisition catapulted it past Verizon Wireless as the top mobile carrier in the United States.

Kenneth Rehbehn, a principal analyst at research firm Current Analysis, said he's heard no more about the merger than what's been reported on television and in print, but said there are similarities here with the Cingular and AT&T Wireless merger this year.

"There are some similar advantages in that Sprint PCS has tended to be more of a consumer offer, whereas Nextel has been a very powerful business offer because of the push-to-talk capabilities and a very extensive suite of software applications and services," Rehbehn said.

But there are some challenges, he warned. Sprint and Nextel would have to first negotiate a technology path before the merger could go through, namely the evolution of Nextel's platform from Integrated Digital Enhanced Network (iDEN) -- a Time Division Multiple Access (TDMA ) technology -- to CDMA2000, the next-generation Code-Division Multiple Access (CDMA ) technology, the most likely migration path for Nextel, according to Rehbehn.

This summer, the Federal Communications Commission (FCC) approved a controversial spectrum swap with Nextel, with the mobile carrier getting 10 MHz of contiguous spectrum at 1.9 GHz for turning in a portion of 800 MHz, which is used by public safety agencies.

It was a decision roundly criticized by Verizon Wireless, at least until Nextel agreed to forego trademark rights to "push-to-talk," the name of its popular walkie-talkie phone service.

Nextel is already familiar with CDMA technology. Two years ago, the company announced a deal with Motorola and Qualcomm to develop a push-to-talk technology on the CDMA platform using Qualcomm's QChat software, which is interoperable with its iDEN-based service.

The move to CDMA2000 won't be cheap for Nextel, though, which might factor into how serious the company is about merging with Sprint.

"A combination with Sprint would potentially help reduce costs for transport of voice and data through their backbone because they would be able to take advantage of Sprint's facilities; Sprint has an extensive fixed offer from their ongoing activities as a long-distance carrier," Rehbehn said. "Secondly, there's the potential for bundling with other business services.

"Being combined with an operator that has made as strong a strategic push as Sprint has towards businesses may help propel subscriber growth beyond your plumbers and craft people that depend on the push-to-talk," he added

Sprint is also ramping up its 3G push, announcing on Tuesday the purchase of $3 billion worth of equipment from Lucent , Motorola and Nortel to bolster its CDMA2000 1x Evolution-Data Only (EV-DO) network.