Wednesday, September 21, 2005

Sprint Nextel Integration Ahead of Track, CAPEX to Increase

Sprint Nextel said that its post-merger integration efforts are ahead of prior expectations. The company increased the net present value of expected synergies from the merger to $14.5 billion. Sprint Nextel also announced plans to increase it wireless CAPEX as it accelerates the rollout of EVDO and EV-DO Revision A.

The updated synergy estimate has a net present value of $14.5 billion, inclusive of taxes and approximately $1 billion in integration costs. Synergy components include:

  • $1.6 billion in revenue and subscriber synergies driven by cross-selling opportunities and improved customer retention.

  • $3.7 billion in capital spending synergies due to elimination of a data overlay network for the iDEN platform, co-location of cell sites and savings from IT and billing systems, partially offset by increased investments to enhance network quality and coverage.

  • $2.3 billion in network operating cost savings from lower site rent and maintenance, reduced fixed and variable access and transport costs, and elimination of duplicate staffing.

  • $4.4 billion in non-network savings driven by the consolidation of IT functions, migration of billing and customer care functions and other general and administrative efficiencies.

  • $3.5 billion in marketing, sales and fulfillment savings as the result of headcount savings, the rationalization of distribution channels, greater volume discounts on devices and other scale benefits.

Sprint Nextel also announced plans to increase its wireless CAPEX to be focused on additional capacity, enhanced in-building coverage and broader geographic coverage. The company now expects to spend approximately $5.6 billion on wireless and long-distance capital in 2005 plus an estimated $900 million for re-banding the iDEN network. In 2006, total wireless and long distance capital is expected be approximately $6 billion plus an estimated $1 billion for re-banding.

Sprint Nextel plans to deploy EV-DO technology to about 150 million direct pops by the first quarter of 2006 and extending this capability to all direct pops with the next version of EV-DO, called EV-DO Revision A, beginning in 2007. The company currently is providing high-speed wireless data services through the EV-DO platform in 20 metropolitan areas and this number is expected to triple by year-end. Sprint Nextel also expects to announce availability of several new EV-DO capable devices in time for the holiday-selling season.
  • CDMA2000 1xEV-DO Rev. A is optimized for packet data service, offering peak data rates of up to 3.1 Mbps on the forward link and up to 1.8 Mbps on the reverse link. It also supports QoS for delay-sensitive applications, including a variety of IP-based services such as VoIP and real-time conversational services such as push to talk, video telephony, low-delay gaming and "instant multimedia" (an extension of push to talk that combines immediate voice with simultaneous delivery of video and pictures). Another key attribute is support for 1xEV-DO Gold Multicast, which would enable the delivery of high-quality video and audio to a large number of users simultaneously.

See also