Cell phone merger: who wins?
From Allan Chernoff
NEW YORK (CNN) -- Cell phone service providers Sprint and Nextel announced plans to combine in a deal valued at about $35 billion Wednesday.
Executives claim the deal is a winner for consumers.
"We are creating the premiere telecommunications company in America -- wonderful news for our customers," said Nextel CEO Tim Donahue.
But the Consumers Union says customers are likely to be the losers.
"We are going to see fewer players, fewer choices for consumers, and that will lead to inflated prices and not as many good deals for consumers," said Gene Kimmelman of the Consumers Union.
Competition among cell phone providers has helped drive prices down and brought about free minutes and free weekends.
But now merger-mania has taken hold of the cell phone business -- after Cingular combined with AT&T Wireless a few weeks ago.
Sprint and Nextel executives are saying nothing about raising prices, and some analysts predict there still will be enough competition that the cost of talking on your wireless will continue to decline.
"After this merger there will be four carriers -- Verizon, Cingular, Sprint and T-Mobile -- but there are also regional players. ... In the long run, it is good for consumers because this combined industry is going to focus on wireless," said Charles Golvin of Forrester Research.
One other benefit: Service for Sprint-Nextel should improve. That means fewer dropped calls and fewer dead spots thanks to a larger network.
The combined company intends to spin off Sprint's local phone business, so Sprint-Nextel customers are likely to hear a push to cut the cord and go completely wireless.