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Friday, December 01, 2006

Merger Planners Failed to Plan for Departure of Customers

One of the more tragic mergers of recent years has been the combination of Sprint and Nextel two wireless carriers that couldn't have provided more divergent services to more divergent customers.  The merger brought together Sprints very large customer base of mostly bargain hunting customers with Nextel's much smaller but high paying customer base of business customers and contractors.

The result was a combination that drove away key executives and talent and even worse drove away customers that were no longer served by the combined company that had less synergy as an added up whole than the two parts had separately.  Usually when companies merge they hope to save costs and gain market share and in a best case scenario provide more than they could have separately.

This could have been the case had the merger planners looked more closely at both the cultures of the management and the cultures of the customer base.  The failure to put two and two together to come up with at least four has resulted in Sprint Nextel's rapid decline in Net Subscriber additions since the merger.  The combined companies have seen their growth drop from two million subscribers a quarter down to a paltry half million per quarter while competitors such as Verizon and Cingular have held steady during the same periods.

This merger seems to have reaped all of the problems and shun all of the benefits and will probably serve as a text book lesson of why some mergers should not be attempted.