I avoid spreading rumors, but once they appear in the mass media, they’re fair game. And such it is with the rumor that Google will buy Sprint. I’ve heard this (only as a rumor, mind you) from a number of reliable sources over the past few months, and, I had a hard time with this one. Why would the world’s leading portal company with a terrific advertising model want to own a carrier? Note that Sprint is both wired and wireless and, while they’ve got issues at present, they are hardly non-viable. A little sprucing up, spinning off, and a few rolling heads should do the trick. The brand is solid. But does vertical integration make sense for Google?
Google has also discussed plans to bid on some blocks in the upcoming 700 MHz. spectrum auction, and buying a carrier is really just another possible direction for what we must assume their strategy to be. And that is – to disintermediate the carriers, thereby working around the lack of network neutrality that will likely be the case for quite some time into the future. Google is afraid that some carriers will attempt to lock them out or otherwise attempt to squeeze revenue out of them just because, well, they’re big and rich and don’t own the distribution channel for their products. This is not as unlikely as it might seem. Without network neutrality as policy, law, and embossed into the Sacred Scrolls for all time, a carrier could indeed steer (or even force) its customers away from Google. Google’s got the cash and friends necessary to pull off a great big acquisition, so what’s to stop them?
Two issues. One is the defocusing effect of getting into a really big business that’s otherwise orthogonal to their primary efforts in portals and advertising. Easy solution here – Sprint would be a separate division with its own management team. There’s no need for much initial cross-pollenization of the two businesses, but there are great synergistic opportunities here over time. The second issue, and the more serious of the two, is financial – with all of the cleaning up that Sprint needs, would the corresponding drag on earnings be acceptable to Google shareholders? Stockholders are rarely interested in vision – that’s one of the factors that got Sprint into its current deep yogurt.
And, of course, other carriers might feel threatened by Sproogle, and put the company on the net-neutrality defensive regardless. So Google has to bet that, as the most popular destination on the Web (they are, right?), customer backlash would protect them in this case. I’d bet that, too. So Google’s acquiring Sprint, or otherwise getting into the carrier business, may not be all that risky after all.
