Rumors swirling around in the marketplace around a Merrill Lynch report predicting Deutsche Telecom (majority holders of T-Mobile) might make a bid to buy out Sprint-Nextel. Given Sprint’s abysmal stock prices now, it would make financial sense for them to acquire Sprint’s considerable assets and 55 million odd subscribers.

However, knowing a thing or two on integration of multiple OSS/BSS systems – it wouldn’t be a pretty merger. The good thing is both T-Mobile and Sprint use the same billing vendor (Amdocs) – so things might be easier than the Sprint-Nextel integration was – it shall still be extremely challenging on the BSS side to integrate all the operational systems of both systems.

Secondly, Sprint uses CDMA/iDEN and T-Mobile uses GSM – that shall be a a huge Mediation and Network activity to integrate the two.

I will go against the grain of conventional wisdom and say the the merger would have advantages. The reasons are relatively simple – for T-Mobile to survive against the behemoths of Verizon and ATT Wireless – it needs economies of scale. It is just too expensive to build out nationwide networks – especially given the fact that T-Mobile currently does not have a 3G network – at a time when leading players – with Sprint leading the pack are actively building out 4G networks.

So, for smaller players to survive -in an age of voice commoditization – it becomes increasingly critical to share infrastructure to rationalize cost. And a Sprint-T Mobile merger can potential have those synergies.

Its important to note that in areas of the world where telecommunication costs are the lowest – India for e.g. – telecom companies are already sharing critical network infrastructure for common good – In India the leading telecom players have a consortium holding company that owns and operates all the towers that are used by competitors. Its good business sense – allows for cost diversification and consequently costs the subscriber a lot less to use services.

I believe that the national telecom players currently have a lot of operational excess – and this merger – if done right – can correct some of that.

Advertisements