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Cingular Wins Out in AT&T Wireless Bid

UPDATE: Days of back-and-forth bidding ended after 2 o'clock this morning when Cingular submitted a $41 billion offer to acquire AT&T Wireless , trumping Vodafone in the auction for the nation's third-largest mobile carrier.

The deal would vault Cingular from its perch as the second-largest wireless provider in the United States to the largest with 46 million subscribers, while hastening long-awaited consolidation in the U.S. wireless industry.

Vodafone bowed out after reportedly offering $38 billion for AT&T Wireless. In a statement, the British carrier said it concluded "it was no longer in shareholder's best interests" to continue. NTT DoCoMo , a minority stakeholder in AT&T Wireless, and Nextel , once thought to be suitors, dropped out Friday.

"Cingular was a strong player before...but we made it clear that if the right opportunity came along, at the right time, at the right price, we wanted to play," Stan Sigman, Cingular's president and CEO said in a conference call with reporters Tuesday.

There are several reasons AT&T is the right opportunity, Sigman said. Both companies use the same wireless standard -- Global System for Mobile communications -- making the combination of networks less complicated. The firms also have complementary customer bases: Cingular is strong with consumers, AT&T Wireless with businesses. Finally, Sigman said significant savings are expected from melding back-end systems, marketing and capital purchase programs of the two companies.

Pending regulator and shareholder approval, the deal should close in the fourth quarter. In that event, the company will operate as Cingular and its headquarters will remain in Atlanta, Sigman said. That doesn't necessarily mean AT&T Wireless' Redmond, Wash., offices will close, he added.

Jobs will be affected by the merger, but it's too early to say how many. What is known is that AT&T Wireless CEO John Zeglis will depart. "I've got a day job here at least until it takes us to close," Zeglis said on the conference call. "I'll stay for whatever transition period Stan asks for."

Zeglis was downright giddy about deal, and couldn't resist taking shots at Verizon Wireless, currently the largest U.S. wireless voice and data provider with 37.5 million customers. "(The merged company) will put a lot of others in its rearview mirror," Zeglis said. "In other words, 'Hey Verizon, can you hear us now?'"

Cingular, a joint venture between SBC and BellSouth , originally bid $30 billion for AT&T Wireless. Telecom industry watchers have said that consolidation among the six U.S. mobile carriers (AT&T Wireless, Cingular, Nextel, Sprint and T-Mobile and Verizon Wireless) is overdue.

Strategically, Cingular had the most to gain from a merger. The firm is seeking to shore up its customer base as the number of wireless U.S. customers and phone features increases. Sensing a takeover, investors have been pumping money into AT&T Wireless stock in recent weeks, despite poor operating results.

Vodafone's offer would have been more complicated. The company would likely have to sell its stake in Verizon Wireless to pull off the deal. The price its shares in Verizon Wireless would fetch could determine whether Vodafone stockholders would go for the AT&T Wireless purchase.

Industry watchers will keep a close eye on Vodafone. Previously, the company maintained that it was happy with its stake in Verizon Wireless, but its $38 billion offer for AT&T Wireless may lead some to speculate that it's decided it wants total control of a carrier.

According to a New York Times report, Ivan Seidenberg, chief of Verizon Communications , majority owner of Verizon Wireless, said no matter which company bought AT&T Wireless, the deal would benefit the industry. By lessening competition, costs might go down for marketing and other expenses, Seidenberg said in recent remarks to analysts. A spokesman for Verizon Wireless was not immediately available to comment.

The merger could force NTT DoCoMo to consider its U.S. market strategy. If the acquisition closes, NTT DoCoMo's 16 percent stake in AT&T Wireless would be converted to cash. The Tokyo-based company said it's reviewing its options.

Although the long term impact of the Cingular-AT&T Wireless is still unknown, one thing is for sure, AT&T Wireless' Zeglis said: "After today, nothing's going to be quite the same in the wireless industry."