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Over the past month, we’ve seen two mergers in the wireless world. First came Verizon and Alltel, with the former acquiring the latter for roughly $27 billion. Late last week, we saw another, with Virgin Mobile purchasing Helio in a merger of Mobile Virtual Network Operators (MVNO). This leaves the cellular-loving world wondering: Who’s next? There’s a rumor swirling that T-Mobile’s parent, Deutsche Telekom, might want to buy Sprint. So let’s see what that might look like.

Largest carrier in America?

At the end of the first quarter of 2008, Sprint had 52.8 million subscribers. Add that to T-Mobile’s current 30 million subscribers, and you get over 80 million. AT&T ended the first quarter with 71.4 million subscribers. Verizon had 67.2 million, and Alltel had 13 million. So when you smush everything together, it looks like T-Mobile/Sprint would come out ahead.

However, that doesn’t take into consideration a number of factors. For instance, it seems unlikely that the merged company would hold onto three different networks. Sprint has had a hard enough time managing a CDMA/iDEN network combination, so adding GSM to that would only make things tougher on the new owners. This would play into rumors that Sprint might want to sell off Nextel. Sounds like an interesting proposition.

How many customers would that mean? It’s tough to find data on Nextel subscribers, but back in 2004 they were estimated at 15 million. I haven’t a clue how to figure their numbers now, but if we just take that 15 million and subtract it, well, it would seem that T-Mo/Sprint would slide back into third place, though they’d be a bit closer to Verizon and AT&T than they had been separately. Plus, with Sprint’s Qchat, maybe they could lure some of the Nextel customers who use the service just for Direct Connect.

Combining the GSM/CDMA networks

Even if Sprint does drop Nextel and the iDEN network, how would a T-Mo/Sprint team handle CDMA and GSM? This becomes even more complicated when you factor in T-Mobile’s AWS licenses and Sprint’s WiMAX project. Engadget Mobile might have put it best: “…and did we mention the infrastructure would be GSM with AWS, PCS CDMA, and iDEN, all competing for spectrum and handset allocation? Good luck guys.”

Many familiar with the cellular industry have proposed solutions to this. The most common opinion I’ve seen is that the new company work towards a gradual merger towards a GMS platform. This would mean the phasing out of Sprint and their CDMA network. The problem, of course, is getting all customers onto new compatible handsets. In essence, that might be a two-year process, and even then you’ll have stragglers who don’t want to sign a new contract and take a subsidy on a new phone.

The most likely solution is that they merged company retains both platforms, at least for the time being. There might be some re-allocation, as to satisfy demand in certain areas. For instance, if there is an area heavy with T-Mobile subscribers but light on Sprint subscribers, they could convert some of those towers to GSM, strengthening the needed T-Mobile signal. However, this strategy would also require the company to pick which platform to use going forward. They would then only sell new handsets with that radio, likely GSM. As more and more customers buy the new handsets, the company could begin converting towers.

This does leave in question Sprint’s WiMAX project. If the company is going the way of GSM, then LTE makes the most sense for the 4G network. Considering the rest of the country is headed in that direction, it might be a necessity. Any way they would choose to do it, though, they would have to learn from the grave mistakes made during the Nextel integration.

Competing on price?

When we looked at the advantages of each major U.S. carrier last week, both T-Mobile and Sprint displayed their advantages in the pricing department. Specifically, Sprint’s Simply Everything plan and T-Mobile’s Hotspot @Home service makes them attractive to prospective customers. So they could certainly compete with Verizon and AT&T based on the pricing of features.

To start, Hotspot @Home could be invaluable to the combined company. While Verizon and AT&T are trying to hold onto their dying landline business, T-Mo/Sprint could go ahead and completely undersell them with Hotspot. Customers would get to keep their home phone number, as well as keep it in the home where it can remain private. Since it only costs $10 per month, about a third of typical landline service, T-Mo/Sprint would also completely undercut landline pricing.

Sprint’s Simply Everything might cost as much as the unlimited plans from the other major carriers, but they offer far, far more in terms of features. Unlimited calling, texting, MMS, mobile Web, Sprint TV, and Sprint Navigation, all for the price you get for just voice with AT&T and Verizon. Offer this across the board to 70-million some-odd subscribers, and you’re going to make some waves. Plus, if you add $10 per month to that, you can add Hotspot. So for $110 plus fees and taxes per month, your wireless and home calling plans are completely taken care of.

Then again, since this would further reduce the number of major carriers in the U.S., it could cause stagnation in pricing. With fewer entities competing, there’s less of an incentive to be the one who stirs the pot and reduces prices. This has to be the largest concern of consumers with a possible merger. No one wants less competition. Oligopolies usually don’t serve the people as well as free and robust markets.

(Incidentally, this merger and the Verizon/Alltel one would leave U.S. Cellular as the No. 4 provider in America. Crazy, huh?)

Can it happen?

It’s tough to say whether this is feasible or not. Many people think it is, and further think that it’s the best way for Sprint to stay above water. Others think that the network integration would be too much of a hassle and cost the entity far too much capital. Both have points, which makes it difficult to make a solid judgment.

However, the competition factor might make this deal a necessity. Sprint is sitting in the 50 million subscriber range, T-Mobile in the 30s. Without a merger, it’s unlikely, possibly impossible, for either of them to catch up to Verizon and AT&T, which are in the 70 million range. It depends, then, on their want to compete at the higher level, of their level of content playing at a lower level.

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