Speaking of ARPU economics, Schwartz does Sprint-Nextel ("Sprextel") math

Summary:Last week, the Wall Street Journal reported that Sprint and Nextel were in merger talks. Now USAToday.

Last week, the Wall Street Journal reported that Sprint and Nextel were in merger talks. Now USAToday.com and other news organizations are confirming that Sprint's acquisition of Nextel, valued at more than $35 billion, is almost done. Meanwhile, Sun's Jonathan Schwartz did the math to approximate how much that makes each Nextel subscriber worth -- about$2400. While that may not be the average revenue per user (otherwise known as ARPU, a concept I mentioned in my blog last week during a discussion of how Sun is looking to turn its Sun Ray thin clients into ARPU generators), that still gives you some idea of the sort of value that telcos assign to customers.

After news surfaced last year that both SprintPCS and Verizon Wireless were on the verge of adding a nationwide push-to-talk (PTT) feature to their wireless services and that Nokia was about to release a GSM-based quasi-PTT phone (the 5140), Nextel, which has had the PTT market all to itself forever, didn't have much of a choice but to do a deal with somebody. Once Cingular and AT&T Wireless announced their merger, the pressure to consolidate in the wireless market intensified. A CDMA-based provider (Sprint or Verizon) versus a GSM/GPRS provider (Cingular or T-Mobile) made the most sense for Nextel to merge with because the company, according to an interview I did last year with Nextel spokesperson Audrey Schaefer, went on to describe how Nextel was working with Qualcomm to bridge its domestic PTT service to CDMA-based PTT service in Europe. That same technology is probably what paved the way towards a merger with a CDMA-based provider here in the US.

But the big question now is which PTT survive will survive the merger (Nextel's or Sprint's?) and what that means for Motorola's iDEN technology (the tech behind Nextel's PTT service). Nextel's PTT service is far more mature than the others. But the company isn't even close to having the sort of high-speed wireless wide area 3G data network (WWAN) that Sprint just decided (finally) to put in place. Perhaps, with the aforementioned bridging technology in place, the PTT-backhaul will be based on the iDEN technology with the front-haul (what you get in your phone) being the newer CDMA-based PTT tech. Or, perhaps the merged company's phones will have two radios (one for Nextel's iDEN and one for CDMA) in them. After all, if users are worth $2400 a piece, putting another radio in the phone isn't that big of a deal (well, maybe it is to battery life). Personally, if they're thinking about putting another radio into their phones, I'd rather see a Bluetooth radio in the CDMA-based phones than an iDEN one.

Like with the AT&T-Cingular merger, another big benefit of the merger, especially to Nextel users, will be better coverage. Since Nextel is the only carrier that's based strictly on Motorola' iDEN technology, Nextel customers have never been able to roam onto another provider's network once they venture beyond Nextel's areas of coverage (being a Nextel subscriber, I'm painfully aware of this). Now, not only might Nextel customers benefit from Sprint's gargantuan hot spot, they might also be able to go where no Nextel customer has gone before thanks to the availability of other CDMA networks (eg: Verizon's).

In the bigger picture of telcos and ARPU economics, the newly minted titan may not be the largest wireless provider in terms of subscribers, but it might very well stand above the rest of the domestic providers in terms of features. For example, no other wireless provider would have the combination of a high-speed 3G WWAN and a >
ttle-tested PTT service. Between the two infrastructures, the opportunities for "Sprextel" to layer on new voice and data services in a way that drives ARPU up are limitless. In terms of marriages, the recent mergers leave T-Mobile and Verizon Wireless as the key remaining bachelor and bachelorette (you decide which is which) amongst the wireless carriers. But don't expect any partnerships there. Given the different wireless DNA between the two (GSM/GPRS vs. CDMA), that would be like mixing oil and water (although, admittedly, I would have said the same thing about Sprint and Nextel). If more consolidation takes place, my guess is that it will involve an Asian carrier like Japan's NTT DoCoMo or Korea's SK Telecom.


Topics: Wi-Fi

About

David Berlind was fomerly the executive editor of ZDNet. David holds a BBA in Computer Information Systems. Prior to becoming a tech journalist in 1991, David was an IT manager.

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