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Sprint Nextel Merger Case Study

Five years after Sprint merged with Nextel, the deal remains a controversial topic in the financial world. Not only has the combined company struggled through several difficult quarters, but also Bloomberg recently named the acquisition as one that "never should have happened."

In a review published last Thursday of the 100 biggest takeovers since 2005, Bloomberg ranked the Sprint-Nextel deal as the third worst for shareholder value. According to the report, though Sprint paid $36 billion for Nextel in 2005, the carrier now is valued at $30 billion, including dept. The two transactions that fared worse were McClatchy's $4.1 billion acquisition of Knight Ridder in 2006 and Boston Scientific's $27.5 billion acquisition of Guidant in 2006.

From the start, the Sprint Nextel marriage posed several unique challenges, including merging different corporate identities and integrating incompatible CDMA and iDEN networks. A bumpy road soon followed, and the carrier lost revenue and shed customers for several quarters.

This year, however, the company began to turn things around. Though it continues to rank behinds its rivals in J.D. Power and Associates customer satisfaction studies, Sprint ranked as one of three firms with the biggest improvement in brand image according to Forrester's annual Customer Experience study.

Also, a focus on price through $69.99-per month "Any Mobile, Anytime" calling plans and the introduction of the nation's first has resulted in less customer churn. In the quarter ending in July of this year, Sprint posted a net loss of $760 million, but gained 111,000 new wireless customers. In the preceding quarter it reported net losses of 75,000 subscribers and $865 million in revenue.


Sprint Nextel Merger History 

Sprint is a US wireless carrier based in Overland Park, Kansas. In December 2004, it an-nounced its plan to acquire Nextel Communications to create the third-largest wirelessprovider in the US, behind AT&T and Verizon. The deal was completed in August 2005.

Sweet marriage proposal

On paper, the merger seemed like a good combination. Sprint was building reputation as aleader in developing content for the consumer market. Meanwhile, Nextel was selling itspress-to-talk feature to gain loyalty from construction crews, taxi companies, and othersimilar businesses. Their disparate yet complimentary assets could have provided a highpotential of value creation. Sprint, which traditionally provided long-distance and localphone connection, was turning its focus to consumer wireless services and wanted to in-corporate Nextel's strategy into its business model. Nextel, which was close to maxing outits network and clientele of business users, would gain access to Sprint's larger customerbase. [1]

IOE 522 - Sprint Nextel Merger Viewed Through Organizational Metaphors


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