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Merger Puts Nextel at Crossroads

Union Could Change Character of Reston's Wireless Upstart

By Ellen McCarthy
Washington Post Staff Writer
Wednesday, December 15, 2004; Page E05

Daniel F. Akerson says the decisions he made as chief executive of Nextel Communications Inc. were all about survival. The choices facing the company in recent weeks, he adds, are a matter of business strategy -- crucial, certainly, but not life and death.

"This is an important crossroads for the company," said Akerson, who served as Nextel's chairman from 1996 through 2001.

_____Live Online_____
Washington Post columnist Steven Pearlstein was online earlier today to talk about the Sprint-Nextel deal and its implications for competition in the wireless phone industry.
Pearlstein Column: Telecom Merger Might Be What Consumers Need
_____Related Coverage_____
Sprint, Nextel Announce Merger Plans (The Washington Post, Dec 15, 2004)
Nextel Story Archive
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Nextel Stock Quote/Financial Information
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Executives from the Reston wireless firm are expected to announce today that it will be merged with Sprint Corp. in a deal worth about $36 billion that would create a cellular company rivaling No. 2 Verizon Wireless in size.

If the deal goes through, it could alter the face and character of a company known for its eccentricities and entrepreneurial spirit. If it falls apart -- as sources warn is a possibility if rival Verizon Communications Inc. makes a bid for Sprint -- Nextel could have an increasingly difficult time battling the giants of the industry on its own.

Nextel is the fifth-largest wireless service provider. Its walkie-talkie technology, which allows users to talk to each other with the push of a button, has helped it develop a loyal and lucrative following of business users. It has the highest average revenue per customer and one of the lowest customer turnover rates in the industry.

But, in the words of Akerson, who is now a managing director at the Carlyle Group, Nextel also has "a lot of issues."

The company's technology can't handle high-speed data functions that consumers increasingly demand. It can't offer customers a package of communications services that might simplify their lives and bill drawers. And Nextel, which has 15.3 million wireless customers, will have to compete with the resources of industry giants Cingular Wireless LLC, which has 47 million customers, and Verizon Wireless, which has 42 million.

It's not yet clear what changes will be in store for Nextel's 18,000 employees, 2,500 of whom work in the Washington area, if the merger goes through. Analysts have pointed out that Nextel's scrappy, entrepreneurial culture is far different from that found in large, long established telecommunications companies like Sprint.

Sprint, which has more than 60,000 employees, would own 51 percent of the new company under terms of the merger, and its chief executive, Gary D. Forsee, is expected to become the chief executive of the combined company. He is expected to move to the new company's Reston office, according to a source close to Nextel.

"That's big. It shows how important he thinks this merger is. It's not just buying a company and molding it into the Kansas City office and forgetting it," said Jeff Kagan, an industry analyst. "It will take a lot to get the two organizations to work together, and he'll be there to make sure that happens."

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