There have been recent articles on eWeek and other sites about the possibility of Google buying Sprint. Although I have said for the past few months that this is something Google should at least look in to, if not do, I’m no longer sure I think its a good idea. Sprint has 2 assets Google should want, Wireless Spectrum and a Tier 1 Network. Most articles and rumor sites I have read have focused on the Wireless portion of the deal because Google has already announced plans to enter the upcoming 700 Mhz auction, which is considered prime for wireless internet , and Wireless Spectrum would allow Google to ensure people can get online everywhere, therefore search from anywhere. Buying Sprint and renewing the plan to build a WiMax network is probably the quickest way to make Google’s dream of everyone having internet access from anywhere come true.
I think the Network is a key, often overlooked, part of a potential deal because of Net Neutrality. If Google owned one of the 9 Tier 1s and promised to be Net Neutral, it may force the other Tier 1s to remain/become Net Neutral in order to stay competitive. Google has openly campaigned for Net Neutrality, including publishing an Open Letter from CEO Eric Schmidt. Buying Sprint would allow Google to put its money where its mouth is, so to speak. Google has bought an undisclosed amount of Dark Fiber, but probably not enough to impact Net Neutrality. Buying Sprint would probably get them there.
There are a few problems with the potential deal. First Sprint’s market cap is roughly $45 Billion. That is a hefty price tag for a struggling company. Second, Sprint uses CDMA and IDEN on their Sprint and Nextel networks, respectively, instead of GSM, which I believe Google would prefer. In addition, Sprint has baggage, such as long distance and a terrible customer service reputation, Google probably doesn’t want to deal with. Google could go for Clearwire, with market cap of roughly $2.5 Billion, instead. Google would save enough money by purchasing Clearwire instead of Sprint, to build the wireless network.
What about the Tier 1 Network I thought was so important to ensuring Net Neutrality? Well, there are other options. AT&T (market cap of $240 Billion), Verizon ($127 Billion), and AOL ($63 Billion) are likely out of the acquisition question because of their price and the number of assets they have that Google wouldn’t want and NTT ($32 Billion) and TeliaSonera ($44 Billion) are likely out of the question because of their ties to foreign governments. Qwest ($12 Billion) is a possibility, but unlikely because there are 3 better options; Level 3 ($5 Billion), Savvis ($2 Billion), and Global Crossing ($1 Billion). Google could buy Clearwire, Level 3, Savvis, and Global Crossing for less than $15 Billion, leaving twice that amount to complete the wireless network before reaching Sprint’s price tag. This plan would allow Google to acquire wireless expertise, in the form of Clearwire, without the baggage of Sprint. It would also allow Google to impact the Net Neutrality debate by becoming one of the largest data carriers in the World.