Cingular Completes Acquisition of AT&T Wireless

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Cingular Wireless announced Tuesday that it completed a $41 billion acquisition of AT&T Wireless Services, creating the nation's largest wireless carrier, following approval from two U.S. government agencies.

The merged company will have 46 million customers, compared to over 40 million for Verizon Wireless.

Cingular officials said work immediately started on integrating the services of the two companies. The two companies' wireless networks will open up to each other immediately, creating expanded coverage for customers, said Stan Sigman, president and chief executive officer of Cingular. Sigman called the merger a "new day" for wireless customers.

The merged company will begin marketing wireless service under the Cingular brand by late November, company officials said.

The news quickly spread through San Francisco's Moscone Center, where the Cellular Telecommunications and Internet Association was holding its Wireless IT & Entertainment show.

Consumer Benefits

Consumers will benefit from the deal, said Ted Neeley, managing director with RHK, an analyst firm in South San Francisco, California. The merged company will have more money to spend on network upgrades and can amortize those expenses over a much larger group of customers, he said.

One of the perennial complaints about AT&T Wireless was its network, and the merger with Cingular should help improve that situation, Neeley said.

Representatives for handset manufacturers Nokia and Audiovox declined to comment on the show floor. Nokia and Audiovox both make handsets for the GSM/GPRS (Global System for Mobile Communications/General Packet Radio Service) networks used by Cingular and AT&T Wireless.

Kyocera Wireless, which focuses exclusively on the competing CDMA (Code Division Multiple Access) technology, will not see a direct effect from the merger of the two companies, said Mary Palmer, a spokesperson for the San Diego company. But further consolidation among other mobile phone carriers will eventually reward handset manufacturers that consistently develop innovative products, she said.

"When you're going after the same customers, handsets are the differentiator," Palmer said.

Layoffs to Come

Officials in the merged company, with about 68,000 employees, said they are likely to lay off some staff, but the layoffs would happen in 2005. Cingular officials haven't determined how many people will stay at AT&T Wireless's Redmond, Washington, headquarters, Sigman said.

"I believe there are a lot of talented people in Redmond," Sigman said.

The company's announcement came the same day as a U.S. Federal Communications Commission decision to approve the acquisition on the condition that the merged company take action to ensure competition in 22 U.S. markets.

The FCC's approval required the merged company to divest itself of customers and other wireless assets in 16 markets, and to divest itself of spectrum in two major markets: Detroit and Dallas. In four other markets, the FCC will require Cingular to convert to passive interests some nonpassive, minority equity interests of AT&T Wireless in competing mobile telephony carriers.

The FCC also required the companies to appoint a management trustee to serve as manager of the divestiture assets until the assets are sold to third-party purchasers or transferred to a divestiture trustee.

The FCC's approval of the acquisition followed an announcement from the U.S. Department of Justice Tuesday, saying the DOJ will require the merged company to divest itself of wireless customers and other assets in 13 U.S. markets.

Cingular, after successfully bidding for AT&T Wireless in February, took the position that no divestiture of assets would be needed to provide consumers competitive wireless services.

Sigman declined to comment on the FCC decision Tuesday, saying he hadn't read the whole decision, but he noted that the FCC and DOJ reviews included 40 million pieces of paper. "The Justice Department and the FCC did a very thorough and deep dive on all these issues," he said.

Sigman will continue to serve as president and chief executive officer of the merged company, and Ralph de la Vega will continue as chief operating officer.

Cingular, based in Atlanta, was formed in 2000 and is jointly owned by SBC Communications and BellSouth. Cingular had more than 24 million subscribers before the merger, and in 2003 earned revenues of approximately $15.5 billion.

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