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Call Center/Command


Nextel maintains iDEN not dead yet

Nextel maintains iDEN not dead yet

Outlook unsure for continued partnership with Motorola after 2007
  • Written by Urgent Communications Administrator
  • 1st April 2005

Nextel Communications said it has no plans to abandon its iDEN platform as a result of the wireless carrier’s pending $33.8 billion merger with Sprint, despite reports, rumors and conjecture to the contrary.

Since the merger was first announced in late 2004, many industry analysts have speculated that the combined company would dump iDEN — the standard over which Nextel’s Direct Connect push-to-talk (P2T) service operates — in favor of Sprint’s CDMA network, a move that would cast iDEN’s continued viability in grave doubt. Nextel said that such fears are unfounded, at least for the foreseeable future.

“While we are keeping our options open in terms of long-term technology as we begin integration discussions with Sprint, we’re very much in a growth mode with the iDEN technology,” said Nextel’s senior vice president of marketing, Mark Schweitzer, who will serve as the chief marketing officer of Sprint Nextel once the merger passes legislative muster.

Schweitzer said Nextel plans to continue expanding iDEN’s geographic footprint and enhancing existing group-calling features, moves buoyed by the rollout of iDEN capacity-enhancement technologies. In addition, the company is ordering handsets from iDEN’s developer, Motorola, in numbers significantly greater than in 2004, and anticipates still larger orders for 2006. Such statements contradict published reports claiming Sprint would migrate all of Nextel’s voice traffic to CDMA by 2008, which Schweitzer said is wholly inaccurate.

“As of 2008, we would have upwards of 20 million handsets on the iDEN network, and at that point in time, it is likely to be the pre-eminent push-to-talk offering,” he said. “A dynamic that exists in our customer base is that over 90% of our users use Direct Connect in a given month, and over two-thirds of conversation is Direct Connect conversation. It’s a network that all hangs together. Economically, we will have invested so much in the iDEN network that there’s no benefit to rapidly force customers off of it. A much higher proportion of new customers will be going on the Sprint network, but force-migrating minutes off the iDEN network won’t make any sense.”

Since the Sprint/Nextel merger was officially announced in December, conventional wisdom has held that Sprint’s CDMA network would emerge as the combined company’s standard of choice. Speculation that Sprint Nextel would completely phase out the iDEN network reached a fever pitch earlier last month following Sprint’s annual Investment Community Meeting, in which executives announced they would launch P2T services on the EV-DO Rev. A platform in 2008 (see chart).

“Before [2008], there’s no way you’re going to phase iDEN out — I’d say it will survive for another two to three years, minimum,” said Phil Cusick, a Bear Stearns analyst. “I would compare iDEN more to analog than anything else. It’s going to be a smaller and smaller slice of spectrum you run it on, but it could be out there for another 10 years. I don’t think it’s going to be out there forever, but it could be five to 10 years before you turn this thing off.”

Regardless of the duration of Nextel’s continued commitment to iDEN, Motorola appears destined to suffer from the fallout. While CDMA now boasts a 20% market share, the iDEN standard has languished by comparison, attracting few other suitors besides Nextel. Canada’s Telus Mobility is another iDEN carrier and a roaming partner of Nextel, but Nextel alone generates 9% of sales and 13% of income for Motorola.

“There’s only one customer in the world for iDEN, and that’s Nextel,” said Iain Gillott, founder of iGillottResearch. “Motorola will tell you there’s a lot of international business and other carriers, but when you look at the relative size of them next to Nextel, it’s a single-carrier business.”

iDEN’s immediate future seems assured. Late last year, Motorola announced an agreement with Nextel to continue supplying the carrier with iDEN products through the end of 2007. The agreement includes continued expansion and upgrades of base station and network equipment, as well as current and future iDEN phones for both Nextel and its Boost Mobile subsidiary. Motorola also announced plans to introduce new iDEN handsets in the next 12 months, among them models with so-called WiDEN technology that promises data rates up to four times faster than current iDEN devices.

But long term, the future’s uncertain. “Motorola is the big loser here,” Gillott said. “If Nextel had migrated to CDMA on their own, then Motorola could have said, ‘We’ll help you,’ and they would have gotten some CDMA business out of it. Now, the network’s already built, and they’re going to have to fight for handset market share. The only worse situation [for Motorola] would be if Nextel went bankrupt and ceased operations.”

Online reports say Motorola will attempt to soften the merger’s blow by developing a gateway and dual-mode iDEN/CDMA phones that would support Nextel and Sprint customers on each provider’s network. Motorola did not respond to repeated requests for an interview.

“I think it behooves [Motorola] to further their CDMA capability and be competitive in that space — the combined Sprint/Nextel entity encourages them to do so,” Schweitzer said. “They have a lot of gain out of iDEN to enjoy over the next several years, and at the same time, they have tremendous upside in the CDMA space, and we hope they are very aggressive in developing options for that space.”

Nextel’s iDEN plans will also impact other iDEN operators at home and abroad, including Atlanta-based SouthernLINC Wireless. “If you think about the number of customers Nextel has and why they acquired them, it wasn’t because of their name — it was because of their product, and the iDEN technology is an incredibly robust product with an appeal for a large segment of the wireless market,” said Bob Dawson, SouthernLINC president and CEO. “It would appear to me that the iDEN technology would continue. It’s still a large and viable business, and my conversations with Motorola lead me to believe that they believe that, too. There are still legs for iDEN, and there will continue to be growth in subscribers, new product and improvements in the infrastructure and the software.”

Gillott is far less optimistic. He said he expects rival handset-makers to begin making ruggedized Nextel-type devices like those familiar to Direct Connect subscribers but optimized for CDMA. If Motorola begins losing its grip on the iDEN market, it could abandon ship altogether, he said.

“[Motorola] has shown in the past they will ditch an industry in a heartbeat if they’re not making money at it, like they did with paging,” Gillott said. “[Motorola CEO] Ed Zander has made it very clear he’s not worried about shedding divisions, and I would not be at all surprised if Motorola announced they were going to float off the iDEN division as a separate company. If they start issuing new iDEN devices and new designs from the middle of this year onward, then they’re going to play in this business. But if we don’t see new designs from the middle of this year onward, then I think Motorola’s saying, ‘We’re shutting it down quietly and slowly.’”


This story reprinted from Telephony, a sister Primedia Business publication

Tags: Call Center/Command content Enterprise Wireless Networks

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