Thursday, January 22, 2004

Industry brief: US phone industry (Part 2, cell phones) Part I This week AT&T Wireless, the #3 US cell phone company, put itself up for sale. The company had lost $83 million in the last quarter, and saw its revenues and customer base shrinking after numerous technical problems and heavy competition from its rivals. Investors are lining up to buy the subscriber base from the company. Last week, Cingular, the #2 cell phone company, made a reported $28 billion cash offer. Other candidates are NTT DoCoMo, the Japanese telephone giant that already has a minority stake in AT&T Wireless; Nextel (the #5 US phone company); German Deutsche Telekom, which already owns T-Mobil, the #6 US cell phone company; and Vodafone, the UK company that owns 45% of #1 Verizon Wireless. Vodafone is reported unhappy being the minority partner in the Verizon Wireless deal, and may sell its stake and exchange it for a competitor. (Vodafone is the #1 cell phone provider in the world.) Cingular seems to be the front-runner. According to an article on internetnews.com, ("Suitors Flock to AT&T Wireless," 1/21/2004), "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 technology on their networks." AT&T Wireless was spun off from AT&T  in 2001. Parent AT&T has its own problems, and is a frequent subject of acquisition rumors. The transaction, and perhaps others to come, is possible because in early 2003, the Federal Communications Commission (FCC) dumped regulations that limited the market share that any company can own in any region. A Cingular/AT&T Wireless merger may restart the merger process until the industry boils down to two or three competitors. Already, Verizon is frequently rumored to be a likely candidate to acquire Sprint. And smaller, privately-owned, players like ALLTEL and Western Wireless may simply be forced out of the game through price and service competition. With minimal regulatory opposition, the US cell phone industry should be a tight oligopoly within two years.  Leading US cell phone companies Company Customers Notes Verizon Wireless 33 million Joint venture of RBOC Verizon and UK's Vodafone (#1 cell phone company in the world) Cingular 23 million Joint ventures of RBOCs SEC and SouthernBell AT&T Wireless 22 million Spun off from AT&T in 2001; 20% stake by Japanese NTT DoCoMo Sprint PCS 20 million Part of Sprint Corporation Nextel 11 million Nextel also big in paging and radio dispatch systems T-Mobile 11 million Formerly VoiceStream, acquired Omnipoint and Arial Communications in 2000; owned by German Deutsche Telekom ALLTEL 8 million CLEC and offers fixed-line services as well, mostly in rural areas U.S. Cellular 5 million Owned by Telephone & Data Systems, a US company Western Wireless 1.2 million Owns Cellular One brand which it uses and leases to others; acquired Hickory Tech in Minnesota in December 2003 7:26:15 PM

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