There are reports that Sprint is considering spinning off Nextel. Interestingly, one of the options being considered:

Sprint is said to be contemplating a couple of options for Nextel. The company has held preliminary talks with Nextel founder Morgan O’Brien, who now runs a company called Cyren Call Communications in McLean, Va., that is trying to create a nationwide wireless network for public-safety communications.

is very similar to a scenario I considered in a post a while back:

It would make a lot of sense at this point to cap investment in the Nextel network, build a robust replacement Direct Connect product on the CDMA side, and invest there instead. Then, in time, either shut the Nextel network down or sell the rump to a specialist public safety provider. What Sprint needs now more than anything is focus on the one hand and a single network, single brand and single device portfolio to drive some serious synergies and efficiencies on the other. Keeping the Nextel network alive indefinitely feels like an act of desperation at this point. [emphasis added]

Nextel is the bear on Sprint’s back right now, and unless it does something to get rid of it, it’s saddled with several big disadvantages in competing against Verizon, AT&T, T-Mobile and even some of the smaller players:

• having to maintain a combined portfolio that is either considerably larger than competitors’ - if it wants each brand’s portfolio to be competitive - or maintain a portfolio a similar size to competitor’s in total, but therefore be uncompetitive within each brand (it appears to be pursuing the latter strategy)
• maintaining a level of investment in networks considerably above that of others because it is maintaining two separate networks
• trying to compete while spending a smaller amount on advertising than competitors while attempting to boost (no pun intended) the visibility of two or more brands
• trying to maintain two rather different customer bases and differentiated messaging and branding for both sets of customers and potential customers.

All of this is on top of the problems the company is already dealing with, although most of those problems stem from the merger in one way or another. Although disentangling Nextel would be difficult and painful it may well be the right thing to do. As long as Sprint has these problems to deal with it’s hard to see how it can ever be truly competitive again.

At the same time, there are rumors about a possible renewed deal with Clearwire. Again, getting Nextel out of the way would allow Sprint to really focus its attentions on investing in the next generation of the core Sprint network, which is a big gamble in its own right.