Deal to create largest wireless carrier in U.S.
Cingular Wireless LLC last week announced plans to buy AT&T Wireless Services Inc., following years of rumors and an 11th-hour bidding battle with Vodafone Group PLC.
Cingular, a joint venture between San Antonio-based SBC Communications Inc. and Atlanta-based BellSouth Corp., will pay some $41 billion in an all-cash deal that is expected to close by the end of the year if approved by shareholders and federal regulators. The new company will retain Cingulars name and its Atlanta headquarters, as well as its current CEO, Stan Sigman.
If the merger happens, it would create the largest carrier in the United States, surpassing Verizon Wireless, based in Bedminster, N.J. As of last week, the combination of Cingular and AT&T Wireless would have 46 million customers and annual revenues exceeding $32 billion, as well as coverage in 97 of the top 100 markets.
"This new company is going to put others in the rearview mirror," said John Zeglis, CEO of AT&T Wireless, in Redmond, Wash., last week in a press conference to announce the deal. "Hey, Verizoncan you hear us now?"
Tough talk aside, Zeglis plans to leave the company when the merger is completed.
"One desk, one salary for the CEO," Zeglis said. "Ill only stay for whatever transition help that Stan might ask me for."
In justifying the massive purchase, Cingular officials gave the same reasons that analysts have given for several months of speculation.
"Cingulars strength is in the consumer market," Sigman said. "AT&T Wireless is strong in the business market."
Sigman said increased demand for wireless services means Cingular needs more radio spectrum than it currently has, and AT&T Wireless can provide that. He said merging the two companies would be technically sensible because both run TDMA (Time Division Multiple Access) and GSM (Global System for Mobile Communications) networks.
"Any way you look at it, this combination makes sense for our companies and for our customers," Sigman said.
Still, some customers are concerned about the logistics of the merger, considering AT&T Wireless history of customer service problems. "AT&T cant even bill TDMA and GSM on the same bill," said Fran Rabuck, an eWEEK Corporate Partner, AT&T Wireless customer and president of Rabuck Associates, a mobile consultancy in Philadelphia. "Now imagine the nightmare of a merger."
Cingular has been historically weak on next-generation data services. When confronted about a lack of enterprise services in the past, Cingular officials would point to Mobitex, the companys long-standing and reliable data-only network. But the company has been slow to build out its next-generation General Packet Radio Service voice and data network, an area where AT&T Wireless has been stronger. On the other hand, some AT&T Wireless customers also use Mobitex, which runs older models of Research In Motion Ltd.s BlackBerry pagers, which are popular with enterprise customers. (All RIMs latest models support both voice and data on newer networks, including AT&Ts.)
"Actually, this will be good for us," said John Halamka, CIO of CareGroup Healthcare System, a Boston-area hospital network. "We use Cingular for many of the older BlackBerrys, and our previous cellular provider was Cingular, so many employees still have accounts with them."