A top T-Mobile USA executive discounted any potential deal between Sprint Nextel (NYSE:S) and MetroPCS (NYSE:PCS) on the grounds that it would create a new network mess for Sprint. Rumors have recently swirled that Sprint may be considering a counterbid to try and outmaneuver Deutsche Telekom in its attempts to have T-Mobile swallow MetroPCS.
At a Sanford C. Bernstein investor conference Monday, T-Mobile CTO Neville Ray said Sprint's network is based on a "dying" technology and that T-Mobile's aim is not to run two separate networks, as Sprint did with Nextel's IDEN network after its 2005 acquisition. "This is not about combining CDMA with GSM band technology," Ray said. "We're going to close the CDMA network down."
Though T-Mobile predicts the deal will result in synergies, the effort is complicated. Analysts have expressed concern about the integration of MetroPCS' legacy CDMA network with T-Mobile's HSPA+ and forthcoming LTE networks (T-Mobile plans on launching LTE next year).
T-Mobile currently operates an HSPA network, while MetroPCS operates LTE and CDMA networks. T-Mobile's merger plan involves moving all of MetroPCS' CDMA customers off that network and onto a combined LTE network from MetroPCS and T-Mobile that would run on AWS spectrum. T-Mobile said it expects all of MetroPCS' customers to be moved onto the new, combined network by 2015 (which T-Mobile said would be aided by MetroPCS' 60-65 percent handset turnover rate).
Ray took several swipes at Sprint's integration with Nextel, which has burdened Sprint with billion in costs. Sprint is shutting down the Nextel iDEN network next year as part of its multibillion-dollar Network Vision modernization plan that will use multi-mode base stations. Network Vision allows Sprint to improve its CDMA network, lower costs and deploy LTE.
Ray said T-Mobile would avoid the headaches that bedeviled Sprint with its Nextel integration. "Track record is important in these things," Ray said. "That's an interesting story I'd love to hear them tell." Sprint has declined to comment on the speculation that it may make a counteroffer. Reports indicated that Sprint's board met Friday to consider such a proposal.
Ray said that because MetroPCS and Sprint use different spectrum for LTE , which would create a major network challenge. Both T-Mobile and MetroPCS are using 1700 MHz AWS spectrum for LTE; Sprint is currently using its 1900 MHz PCS spectrum. T-Mobile is refarming its own 1900 MHz spectrum for HSPA+ services.
In a separate interview with AllThingsD on Friday, Ray said that once the merger is approved T-Mobile will start selling MetroPCS-branded smartphones that run on its network. He said the most difficult task will be to move as many CDMA customers to the new combined network as quickly as possible. "The technology pieces are relatively straightforward here," he said. "I don't see any big technology barriers we need to knock down."
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