10
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Wednesday, February 18, 2004
THE BATTALIAS
Cingular buys AT&T Wireless to
create nation’s largest cell carrier
By Harry R. Weber
THE ASSOCIATED PRESS
Cingular to acquire AT&T Wireless
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ATLANTA — Cingular
Wireless agreed to pay nearly
$41 billion in cash to buy AT&T
Wireless Services to create the
nation’s largest mobile phone
company, raising concern
among consumer advocates that
it may hurt competition and
impede lower prices.
The deal announced Tuesday
between the second and third
largest U.S. wireless companies
would create a cellular giant
with 46 million subscribers and
70,000 employees. Current mar
ket leader Verizon Wireless has
37.5 million customers.
The deal — subject to
approval by AT&T Wireless
shareholders and federal regula
tors — would be a boon for
Atlanta-based Cingular’s efforts
to cut costs, fill service gaps and
expand its spectrum, or radio
frequency, in several key U.S
markets, thus enabling it to offer
wireless Internet access at
broadband speed.
“This combination is expect
ed to create customer benefits
and growth prospects neither
company could have achieved
on its own and will mean better
coverage, improved reliability,
enhanced call quality and a wide
array of new and innovative
services,” said Stan Sigman,
president and chief executive of
Cingular, who will continue to
lead the company.
Some fear the merger could
reduce the fierce competition
that has driven down prices in
the U.S. cellular market, trim
ming the number of national
players from six to five.
“Losing a competitor in this
kind of market hurts consumers,
especially when you’re merging
the big players,” said Mark
Cooper, director of research at
the Washington-based Consumer
Federation of America. “It’s not
five and ^ix that’s merging. It’s
Cingular Wireless agreed to buy AT&T Wireless for nearly $41
billion, creating the nation’s largest cell phone company.
Market share
T-Mobile 8.5%
Cingular AT&T
15.6% Wireless
14.2%
Verizon
24.3%
Sprint
10.3%
Other
19.1 0/ -
Combined
29.8%
Nextel
8.0%*
•Based on
3Qnumtes
SOURCE: The Yankee Group
two and three, and that’s a much
bigger impact on competition.”
Guzman and Co. analyst
Patrick Comack said he doesn’t
expect prices to go up if the
deal is approved: “You still have
some very aggressive competi
tors out there.”
Cingular, a joint venture
between SBC Communications
Inc. of San Antonio and
BellSouth Corp. of Atlanta, said
it will pay $15 cash per share,
valuing Redmond, Wash.-based
AT&T Wireless at $40.7 billion.
Cingular also will assume $6
billion of AT&T Wireless debt.
The combined company will
carry the Cingular name. Once a
deal is approved, billing and other
operational functions will be
merged, though there will be no
immediate effect on customers,
said Ralph de la Vega, Cingular’s
chief operating officer.
As for possible job cuts or
management changes, de la Vega
indicated there could be some,
though he would not elaborate.
Comack, the Guzman and Co.
analyst, said significant layoffs
are expected because there is so
much duplication.
“They don’t need the AT&T
Wireless employees at all. They
might save some salesman, but
everything is redundant,”
Comack said. “Cingular dou
bled their customer base and
doubled their spectrum, but they
can run that with the same
amount of employees.”
AT&T Wireless had pli
to cut 1,900 jobs from a
force of 31,000 by the end of
2005. Cingular has about 39,0(1
employees. AT&T Wireless Is
22 million subscribers. Cinguli
has 24 million subscribers
BellSouth chief execute
Duane Ackennan said the
should save Cingular $1 b
by 2006. Savings will come fa
several areas, including
spending and network constitu
tion, he said. The deal also a
save hundreds of millions of dol
lars in marketing costs
AT&T Wireless, a spinoff no
longer affiliated with
Corp., has struggled recent!)
Late last year, it couldn’t addne*
subscribers because of a glitch
a new software system designed
to improve customer service.Hie
company also has acknowledged
that it lost more customers than
gained under new federal mki
that took effect in late Novembei
allowing cell phone users
change carriers without los
their phone numbers.
In trading on the New Yod
Stock Exchange, AT&I
Wireless shares climbed $1.%
6.5 percent, to close i
or
$13.78. Shares of SBC, w
owns owns 60 percent d
Cingular. fell 18 cents to $24.8’
while shares of 'BellSoint
which owns the remaining I
percent, fell 49 cents to $2!
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