News of a $27 billion bid to acquire AT&T Wireless
by Cingular Wireless reached a fevered pitch Wednesday, though officials everywhere
are mum on the subject.
Peter Rowe, a spokesperson at the No. 3 wireless carrier, wouldn’t comment on a Dow Jones report that claims AT&T Wireless has gone so far as setting up a formal auction process, with law firm Wachtell Lipton and Merrill Lynch & Co. as advisors.
Three wireless carriers have emerged as front-runners in a possible bid: Cingular Wireless, a joint venture between SBC
and the nation’s second-largest wireless carrier; NTT DoCoMo, which owns a 17 percent stake in AT&T Wireless; and Nextel Communications
, ranked fifth in the country.
U.K.-based Vodafone is considered a likely suitor, though experts wonder how the telecom provider would be able to extricate itself from its 44 percent joint ownership (with Verizon
) in Verizon Wireless, the largest wireless phone carrier in the U.S.
Becky Diercks, an analyst with telecom analysis firm In-Stat/MDR, said a deal between Cingular and AT&T Wireless is potentially a good idea, given the markets each caters.
“The types of customers the two companies have are complimentary, AT&T Wireless has a sharp focus on the business customer, where Cingular is far more focused on the consumer,” she told internetnews.com.
There will be some overlap, she said, that both sides would have to look at in the event Cingular wins the bid, and the Federal Communications Commission will most likely get involved in a merger between the second- and third-largest wireless carriers in the U.S., though it remains to be seen what actions the agency will take, if any.
A merger between Cingular and AT&T Wireless would give the new entity approximately 46.2 million customers, nearly 10 million more than today’s largest phone carrier, Verizon Wireless.
FCC Chairman Michael Powell and commissioners in January 2003 eliminated the cap on how much one wireless provider could own in a particular metropolitan statistical area (MSA), concluding there were no first-mover advantage in the wireless industry. Previously, a wireless provider could hold no more than 45 MHz of wireless spectrum in any one MSA.
Peter Firstbrook, a senior research analyst at the META Group, said there’s a good possibility for a three-way merger down the road: between Cingular, AT&T Wireless and T-Mobile, number six on the list of U.S. wireless carriers. All three use global system for mobile communications
“(All three) are already doing a lot of network sharing and roaming agreements,” he told internetnews.com. “It would unite the GSM market and give them the biggest, by far, installed base in network.”
Diercks said the $28 billion offer many news agencies are claiming was submitted by Cingular to AT&T Wireless is a fair, but by no means spectacular, deal. It’s pretty much the value of the company right now, which is trading at $10.68 at press time, and nothing more.
Clay Owens, a Cingular Wireless spokesperson, said the company has no comment on reports of his company’s interest in AT&T Wireless. More details may become available this afternoon, when Cingular reports on its fourth quarter 2003 results.
NTT DoCoMo is also considered a top bidder for AT&T Wireless; with its 16 percent stake and Nobuharu Ono, NTT DoCoMo USA CEO and president, on the board of directors, the company is a well-known entity and could ask for a lower price.
However, according to a BBC report, shareholders for NTT DoCoMo USA’s parent company in Japan are skittish about more foreign investment. The report said NTT DoCoMo had to make a $10.48 billion write-off for minority stakes in telecom companies like KPN out of the Netherlands and 3, a wireless provider owned by Hutchison Whampoa in China.
Nextel Communications has also been named a front-runner in a possible AT&T Wireless bid, but Firstbrook finds that unlikely.
“I’m not a financial analyst, but I don’t think they have enough cash,” he said. “They’re doing pretty well and they have a nice little niche market with the PushToTalk and a loyal customer base that won’t go away soon, but they’re also on a different network technology, so there’s no economies of scale.”
Nextel’s network technology relies on integrated digital enhanced network (iDEN), a technology created by Motorola that operates on the 800 MHz, 900 MHz and 1.5 GHz bands, though it is based on the GSM architecture. GSM, however, operates at the 1900 MHz frequency in North America.
“I think that would just put them in debt and push them over the edge,” Firstbrook added.