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Analysis Of Sprint And Nextel Merger

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ANALYSIS OF SPRINT AND

NEXTEL MERGER IN AUGUST 2005

TABLE OF CONTENTS

EXECUTIVE SUMMARY iii

INTRODUCTION 1

ANALYSIS OF MERGER 2

BEFORE THE MERGER 2

AFTER THE MERGER 4

CUSTOMER SERVICE SURVEY 9

CONCLUSIONS 13

RECOMMENDATIONS 14

APPENDIX 16

LIST OF FIGURES

FIGURE 1. 2005 TIMELINE OF SPRINT/NEXTEL LEGAL ISSUES 6

FIGURE 2. MARKET SHARE 7

FIGURE 3. CURRENT SPRINT/NEXTEL CUSTOMERS 9

FIGURE 4. REASON(S) FOR LEAVING SPRINT/NEXTEL AFTER MERGER 10

FIGURE 5. SATISFACTION OF CURRENT SPRINT/NEXTEL CUSTOMERS 11

FIGURE 6. CHANGE IN CUSTOMER SATISFACTION POST-MERGER 12

EXECUTIVE SUMMARY

Purposes of the Report

The purposes of this report are to (1) address the problems Sprint and Nextel incurred before the merger, (2) discuss the merger itself, (3) determine problems that arose as a result of the merger, (4) determine if the merger fixed previous problems by collecting primary data from consumers through a survey, and (5) recommend ways to alleviate the problems.

The Sprint Nextel Merger

In August 2005, two major telecommunication providers, Sprint and Nextel, merged into the third leading wireless carrier known as Sprint Nextel Corporation. Executives believed the merger would bring greater success to Sprint Nextel, than remaining as separate entities.

Both Sprint and Nextel experienced problems before the merger. Sprint was accused of billing problems, unauthorized charges, poor customer service, and weak signal strength. Nextel faced similar problems. They too were accused of poor customer service, billing discrepancies, cancellation difficulties, and unethical sales practices.

As expected, both problems and benefits arose from the merger. Profit and market share increased. New customers were added, which gave Sprint Nextel Corporation a more competitive position in the wireless industry. However, new problems added to the existing problems of the two companies. Affiliate companies operating under Sprint and Nextel are suing on the grounds that the merger breached their contract. In order to solve this problem, Sprint is buying all of their affiliates. Also, Sprint and Nextel are operating under different technologies and are currently working to integrate the two.

Survey

We created a survey that asked previous and current Sprint customers if they were/are satisfied with different aspects of the services they received or are currently receiving. This enabled us to pinpoint Sprint’s weaknesses and determine if the merger added to Sprint’s problems or alleviated previous problems. Our survey confirmed that many customers left Sprint after the merger because they were dissatisfied with some aspects of the company. However, many of them remained customers because of the increase in service areas and signal strength.

Recommendations

1. Improve Customer Service

a. Track phone calls with e-mails

b. Employ more customer service representatives, especially at peak times

2. Extend coverage area

3. Strengthen wireless signals

4. Design an itemized bill with a complete explanation of fees

5. Integrate Sprint and Nextel’s separate technologies

6. Improve product quality to compete with other providers

ANALYSIS OF SPRINT AND

NEXTEL MERGER IN AUGUST 2005

INTRODUCTION

Companies around the world are beginning to discover new ways to decrease competition and gain market share through mergers. In the first quarter of 2006, merger volume in the United States was $331 billion, a 19 percent increase from the first quarter of 2005 (Dolbeck, 2006). This trend has escalated rapidly in the past few years and continues to revolutionize businesses today.

In December 2004, two major telecommunication providers, Sprint and Nextel, merged into the third leading wireless carrier known as Sprint Nextel Corporation, behind Cingular Wireless and Verizon Wireless (Sprint-Nextel Deal?, 2004). Sprint’s President and CEO, Gary Forsee, was named CEO of the newly created company. The CEO of Nextel, Tim Donahue, serves as the Executive Chairman. Stockholders have been notified that each outstanding stock for Nextel has been added to the Sprint Nextel Corporation’s common stock, equaling 1.3 shares for every one outstanding Nextel share (Sprint, Nextel In $36B Merger, 2004).

In a $35 billion deal, Sprint Nextel prides itself on being able to provide innovative services and technology to a wide range of consumers, business associates, and government officials. Although Mr. Forsee has said, “This merger positions Sprint Nextel for greater success than either company could have achieved alone," there are many obstacles that Sprint Nextel must overcome in order to become the leading cell phone network provider. First, one must examine the problems with Sprint and Nextel before the merger.

ANALYSIS OF MERGER

Before the Merger

Before Sprint acquired Nextel, Sprint was ranked as the nation’s third largest wireless company as well as the third leading carrier in long-distance service (Sprint-Nextel Deal?, 2004). However, there have been many complaints against the company. For example, the company has been accused of billing problems, unauthorized charges, and rude, unhelpful customer service.

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