Nextel Flop Hits Sprint

"I don't think the government was happy with the merger," says one analyst with contacts within the government. "They didn't like Sprint's tinkering with Nextel, and that's where all the falling-out started from."

This falling-out is particularly troublesome for Sprint on the wireless front, where the company provides walkie-talkie phones to most federal agencies. The phones rank as a favorite among field workers and job teams.

Sprint says it will seek an explanation from the GSA and possibly protest the decision.

A company representative says the unfavorable decision stems from "technical issues, not the Nextel merger ... be certain of that."

As for losing existing customers, the rep said that isn't an immediate issue.

"I would say it would take a few months. It's not going to happen overnight," the rep says.

Neal Fox, a former GSA assistant commissioner who now runs his own procurement consulting business, says Sprint will likely regain its contractor status with some help from consultants who can clear up the snags.

"Given that the government had to revise the solicitation seven times ... the government probably didn't have the requirements straight," Fox says.

But in the wake of the shocking snub, some observers are ready to making predictions.

"AT&T is the big winner here with the two-way phones," says Telecom Pragmatics' Sam Greenholtz, a former Verizon engineer turned consultant. "As Sprint shrinks, watch AT&T grow."

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