December 14, 2004
Motorola May Lose Big Customer if Nextel Merges
By KEN BELSON

print's negotiations to buy Nextel have ignited fears that Motorola will
lose its exclusive deal to supply phones and equipment to Nextel.

That loss could mean gains for Lucent Technologies and Nortel Networks,
which are the main suppliers of wireless network equipment to Sprint.

The possibility of a union of Sprint and Nextel is "a bonanza" for Lucent
and Nortel, said Susan Kalla, an analyst who covers the companies for
Friedman, Billings, Ramsey.

If a merger occurs, she and other industry analysts say, Sprint will induce
Nextel's more than 15 million subscribers to turn in their handsets, which
use an unconventional technology called iDEN.

Sprint is likely to encourage these customers to buy its handsets, which use
a more common technology known as C.D.M.A., or code division multiple
access. And to handle the influx of millions of extra customers, Sprint will
probably have to order more equipment from Lucent, Nortel and other vendors.

Ms. Kalla said she expected Sprint to take as long as five years to shut
down the iDEN network, giving it time to expand its C.D.M.A. network without
pressuring Nextel customers to swap handsets.

Since Thursday, when reports that Sprint and Nextel were in merger talks
first surfaced, investors have focused most on the potential damage to
Motorola. Its shares plunged 7.8 percent on Friday, though they rebounded
yesterday.

Shares of Lucent and Nortel, by contrast, have been little changed. This is
because the benefits of a Sprint-Nextel union are "just too subtle of a
story, and we're not talking about gobs of money," said Brett Azuma, the
head of research at RHK, a telecommunications consultant.

How Sprint ends up persuading Nextel's customers to switch to C.D.M.A.
phones will help determine how large a windfall Lucent and Nortel might see,
and how soon. Companies in such situations are careful not to set hard
deadlines for cutting off older services because customers may rebel by
switching carriers. At the same time, it becomes expensive to continue
operating a network that is used by few customers.

As has been the case in other mergers, Sprint would most likely offer
customers with iDEN handsets financial incentives to give up their phones
when their contracts come up for renewal, analysts say. Sprint may subsidize
the price of the new phones and offer discounted service plans, especially
for businesses with many phones on their accounts.

Steve Levy, an analyst at Lehman Brothers, says he expects former Nextel
customers to begin shifting to C.D.M.A. phones in 2006 if a Sprint deal goes
through.

Sprint could also concentrate on improving its "push to talk" service, which
allows a cellphone to double as a walkie-talkie. This service has proved
immensely popular at Nextel. As of June 2004, Sprint had signed up 360,000
subscribers for its version, though its customers, unlike those of Nextel,
have to pay a $5 monthly fee.

No matter how Sprint chooses to handle these issues, it ultimately would
need more capacity to handle the extra customers. Nextel's 15.3 million
subscribers would make up about 40 percent of the merged company's customer
base. Lucent and Nortel have not been able to provide equipment to serve
those customers because of Motorola's exclusive agreement.

Given all the unanswered questions, industry analysts say it is hard to
predict how much money Sprint will have to spend to expand and transform its
network. The company last week said it would invest $3 billion during the
next three years to enhance its network to provide high-speed Internet
access.

Sprint could scale back these plans and instead use the savings to expand
the capacity of its current digital network, or explore technology that
allows for high-speed data connections and voice service on one network.

http://www.nytimes.com/2004/12/14/technology/14phone.html?oref=login

Other implementations of PTT on CDMA and GSM systems are no
substitution for the direct connect implementations as found on iDen
networks.  The trades especially like the direct connect PTT as it's
implemented in iDen.  CDMA PTT is a poor immitation.  And considering
that iDen handsets are almost 100% from Motorola I think you're
mistaken.

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