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Sprint’s Merge with SoftBank: A New Direction Outside of the U.S.

America’s third largest wireless carrier Sprint announced in May that it would shut down its Nextel network as soon as June of next year to make room for its next-generation LTE network.  Additionally, AT&T now plans to target Nextel’s disgruntled customers—adding to the latest of Sprint’s problems in the U.S.  But SoftBank’s acquisition of Sprint could make the wireless carrier a game changer in other markets such as China and India.

Sprint’s history of massive revenue loss and subscriber decline began with the company’s merge with Nextel in 2005.  The telecom merger was considered a disaster as the challenges of integrating two different networks—Sprint’s CDMA and Nextel’s iDen—proved to be insurmountable.  Sprint lost 4 million subscribers in 2008 and the company is still trying to recover from its $29 billion loss from the Nextel acquisition.

As Sprint revealed its third quarter net loss of $7.3 billion last month, Verizon boasted 1.5 million new contract subscribers—surpassing the expected goal of 900,000 this year.   AT&T also announced the addition of 150,000 new contracts.  These combined American wireless carriers make up the top two leading nationwide carriers with Sprint trailing behind in third place.  The gap, however, is widening between the AT&T-Verizon duo and Sprint in the U.S.

Sprint’s recent loss of 450,000 additional contract subscribers alludes to its weakening grasp of the subscriber share in America.  While Sprint has been trying to transform its brand by closing down Nextel and launching an upgraded push-to-talk service on its CDMA service, AT&T has announced that it hopes to woo over 10 percent of Sprint Nextel’s remaining customers to its own push-to-talk products.  To bolster these efforts, AT&T released the Rugby Pro in September, along with several other devices, with enhanced push-to-talk services on its latest-generation LTE network.

But Sprint’s saving grace could come from its merger with Japan’s second leading mobile telecommunications carrier, Softbank.  Softbank recently confirmed its acquisition of 70% of Sprint for $20 billion.  However, even with SoftBank’s infusion, it is doubtful that Sprint is able to catch up to either Verizon or AT&T in the near future.  Verizon and AT&T are expanding their LTE networks at a rapid speed throughout the states and Sprint’s efforts might be too little and too late in the U.S.

Instead, SoftBank could intend to make its way into the Chinese market through Sprint Nextel’s LTE technology. SoftBank would gain a significant user base for 4G LTE standards from Sprint in order to compete with the larger mobile markets in China.  By obtaining an already existing customer base for TD LTE 4G services in the U.S., it would give SoftBank and Sprint an advantage over Verizon, AT&T and China Mobile as commercial TD LTE services are expected to start next year in China, Japan, and India.  Together, the powers of both Sprint and SoftBank could have enough ammunition to finally tackle the dominant mobile carriers globally.  Hopefully, this merger ends up better than the last one.

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