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- 12-23-2003, 06:32 AM #1G RGuest
AT&T Wireless Is Seen
As Possible Deal Partner
For SBC, BellSouth Venture
By ALMAR LATOUR and JESSE DRUCKER
Staff Reporters of THE WALL STREET JOURNAL
Cingular Wireless wants to make an initial public offering next year to help
fund expansion, people familiar with the situation say.
The nation's second-largest wireless-service provider is also exploring a
merger with or acquisition of AT&T Wireless Services Inc., these people say.
It isn't clear what stage Cingular's plans have reached. Such a move would
mark the onset of a long-expected consolidation of the U.S. wireless
industry, splintered among six national companies.
Cingular is a joint venture of SBC Communications Inc., which owns 60% of
the company, and BellSouth Corp., which owns 40%. Voting rights are split
50-50 between the two large regional phone companies.
"At Cingular, there is strong momentum building for both an acquisition or
an IPO," one of the people said. "This is more than just running scenarios."
Representatives of Cingular, SBC, BellSouth and AT&T Wireless declined to
comment.
While Cingular's parent companies have been eager to do a deal for some
time -- and SBC Chairman and Chief Executive Ed Whitacre has made no secret
of his desire for such a merger -- the discussion lately has intensified
between the two parents.
Should efforts to work out a deal with AT&T Wireless fail, Cingular could
revive talks with T-Mobile USA Inc., the U.S. arm of Deutsche Telekom AG,
people familiar with the situation say.
Last year, T-Mobile USA had discussions with both Cingular and AT&T Wireless
about a possible deal.
Several industry analyses have raised doubts about how much cost advantage
is created after operators reach 10 million subscribers. Nevertheless,
Cingular has struggled for more than a year.
Cingular's growth is important to BellSouth and SBC, which have been seeing
their core business of local landline telephony shrink amid increased
competition and the emergence of new technologies. Both companies have
installed some of their top executives to run Cingular. BellSouth
troubleshooter Ralph de la Vega, who headed up and turned around the
company's ailing Latin-America division, recently was appointed Cingular's
chief operating officer.
Although Cingular is the country's second-largest cellular operator based on
subscribers, it has experienced difficulty for more than a year. Last year,
it lost subscribers for two straight quarters, a first for big wireless
carriers.
During the third quarter of this year, Cingular's operating expenses rose
more than twice as fast as its revenue grew. Although it finally returned to
strong customer growth, its average revenue per subscriber fell slightly.
The carrier also still faces difficulties competing on national calling
plans, because it lacks spectrum in several large cities.
Over the summer, Cingular announced new plans that would help it leverage
the cost structure of its parent companies, unveiling a product to allow
calls to a Cingular cellphone to be received over a land line.
It isn't yet clear whether SBC and BellSouth agree on a strategy to expand
their wireless operation, because the two companies have disagreed on
strategic wireless matters in the past. Moreover, it remains uncertain
whether the economic climate will allow Cingular's parents to stage an
initial public offering. And while SBC and BellSouth are eager to gobble up
another wireless player, merger talk in the industry has persisted for
years -- without results.
U.S. wireless carriers experienced surprising subscriber growth in 2003,
after many analysts predicted that growth would slow significantly. But
industry price wars have intensified lately, as the six national carriers
girded themselves for new federal rules -- which took effect last month --
allowing cellphone customers to keep their numbers when switching carriers.
The new rules are expected to increase costs and customer turnover. Cingular
has 23.4 million subscribers. AT&T Wireless has 21.9 million customers.
Write to Almar Latour at and Jesse Drucker at
Updated December 23, 2003 1:19 a.m.
Copyright © 2003 Dow Jones & Company, Inc. All Rights Reserved
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