Sprint Nextel to start phasing out Nextel in 2013
New York • Sprint Nextel Corp. said it will start phasing out the Nextel part of its network in 2013, a decision that follows near-constant subscriber losses since Sprint bought Nextel in 2005.
The shutdown, aimed at saving Sprint $10 billion to $11 billion, should be complete in 2015. Sprint, the country's third-largest wireless carrier, had said it would eventually shut down the aging Nextel network but hadn't said when until Monday.
Nextel's signature feature is its fast push-to-talk function, which resembles a walkie-talkie. It once made Nextel popular with outdoor workers such as construction crews. However, the network doesn't support fast data transfers, making it unsuitable for smart phones. Sprint plans to offer Nextel subscribers a push-to-talk function on new phones on the Sprint network instead.
The Nextel network being phased out has been an enormous burden to Sprint. The company has been saddled with the cost of running two incompatible networks, contributing to constant quarterly financial losses since 2007. Nextel phones don't work on the Sprint network, and vice versa, though a few phones can use either network.
Shares in Sprint rose 25 cents, or 6.4 percent, to $4.17 Monday.
Sprint paid $36 billion for Nextel in one of the worst corporate deals ever. Subscribers started fleeing soon after the deal closed because of poor customer support and network performance, leaving Sprint to write down 80 percent of the purchase price just three years later.
Nextel had nearly 18 million subscribers when Sprint bought it. Now, about 11 million subscribers use the network, and more than a third are relatively low-paying no-contract Boost Mobile customers. The Sprint network has 37.8 million subscribers and is gaining new ones this year after some losses last year.
Sprint is promising a "second-generation" push-to-talk feature to take the place of its current Nextel offering. Radio spectrum to be freed up by the Nextel phase-out will help make that possible.
However, both Sprint and Nextel customers will need new phones to use the feature. By putting off the phase-out until 2013, Sprint is allowing two-year Nextel contracts signed this year to expire before moving the subscribers over to Sprint's network.
Sprint tried offering a feature called Nextel Direct Connect on some Sprint phones in 2008, but the initiative faltered because the Sprint network wasn't quite capable of offering the split-second call connection speeds users had come to expect from Nextel.
Nextel no more • Sprint Nextel Corp. set a date for its shutdown of the Nextel network. It will start in 2013 and be finished in 2015 or sooner.
New phones • Nextel's popular push-to-talk feature will be replicated on Sprint phones, the company says. However, both Sprint and Nextel customers will need new phones to take advantage of it.
The background • The Nextel network has been losing customers for years, and it's been a heavy financial burden for Sprint, which bought Nextel in 2005 for $36 billion.