The squeaky wheel is getting the grease at Sprint.
An announcement was just made today that Sprint plans to buy US Unwired, a wireless company that in the past really hasn’t had an indentity of its own. In fact, the only reason for the company’s existence was to serve as an extension of Sprint PCS’ wireless phone coverage footprint. This is common practice in the cell phone industry: the major carriers (Sprint, Nextel, Verizon, Cingular) plant their antennas and gear in the major metropolitan areas, and the less profitable rural areas are contracted out to small outfits (like Alamosa PCS, Western Wireless, Nextel Partners, Inc. and US Unwired). These small outfits, known as affiliates, operate their business in a way that makes it seamless to the end user, making them think they are doing business with the actual main carrier. In turn, the affiliates get a cut from the billing revenue that comes in, and also get a type of roaming-charge income for the amount of time used by the main carrier’s customers whenever they travel through the affiliate’s area.
US Unwired, however, was not happy with this arrangement, especially after the announcement was made that Sprint was merging with Nextel. Lawsuits were filed, and this purchase of the company by Sprint is obviously being done to resolve the matter.
While it won’t happen right away, we will probably ultimately see more of these affiliates being gobbled up. They served a purpose back when the cell companies needed coverage fast; now, they’re becoming a liability and can cause problems when such an affiliate goes belly up, or gets jealous when their main partner buys another company and expands coverage into their territory.