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Cingular Buys AT&T Wireless; Whither 3G?







Cingular Buys AT&T Wireless; Whither
3G?

Cingular Buys AT&T Wireless; Whither
3G?
02/17/2004 11:44 AM

Cingular has successful bid for AT&T Wireless -- and where's the data discussion in all this?: The coverage of the AT&T Wireless deal focused almost exclusively on customer acquisition, marketing budgets, infrastructure, and voice revenue, despite the growing certainty that next-generation (3G) cell data and voice services will be the biggest competitive factors for U.S.-based carriers in the remainder of this decade. AT&T Wireless has nationwide EDGE (about 100 Kbps top realistic speed, but more like high-modem speeds reliably). Cingular has GPRS, but last year was saying they would be building out EDGE quickly, and then hasn't discussed it since. The combined company will obviously focus its efforts on a quicker rollout of W-CDMA, the GSM evolution standard for 3G data/voice, especially with the commitment of Verizon Wireless of $1 billion to fully deploy 1xEvDO (up to 400 Kbps) nationwide this year. (Verizon Wireless has overnight become the No. 2 U.S. carrier, pending approval of the Cingular acquisition of AT&T Wireless.) A not-so-obscure factoid missed in all of the reporting I've seen about AT&T Wireless is its requirement to repay a $6.1 billion -- yes, BILLION -- loan to DoCoMo if they don't have four U.S. cities set up by Dec. 31, 2004, with commercially offered 3G data services. (Here's an article from last July about it.) EDGE is 2.5G and doesn't qualify, as I understand it, but I haven't seen an update on the story. It's strange that in a $41 billion deal a loan of $6.1 billion that would need to be repaid if conditions weren't met that are currently unmet wasn't highlighted as one of the liabilities of acquiring the company. I can only hope that Cingular did more due diligence than some of the business press....




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$41 billion. What will the resulting company be, and do? Wow. Dan Gillmor has this to say about why the mega-merger shouldn't worry those concerned about carrier consolidation:
This merger won't necessarily be bad for competition.I've been using AT&T Wireless' GSM service for about a year now. Quality of service is marginal, and the customer service has been a bit lower than marginal. But Cingular, also a GSM carrier, has an even worse reputation. So maybe combining these two networks will create something that offers at least reasonable quality.

Cingular probably overpaid, but it's smart to make this deal in at least one respect. There's only room for a couple of mergers before the market gets too cozy for real competition. While expecting serious antitrust scrutiny from the Bush administration is probably futile, there's probably enough angst in Congress to keep consolidation from being rampant.


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