Cingular Offers To Buy AT&T Wireless - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

IoT
IoT
Infrastructure

Cingular Offers To Buy AT&T Wireless

The $27 billion deal would create the nation's largest cell-phone carrier, but it's likely to start a bidding war.

ATLANTA (AP) -- Cingular Wireless has fired first in a potential bidding war to buy AT&T Wireless, offering more than $27 billion cash for a deal that would create the nation's largest cell phone company.

AT&T Wireless' board of directors received a formal offer from Cingular over the weekend, several sources with knowledge of the situation said Tuesday on condition of anonymity.

But three other wireless companies have also contacted AT&T Wireless to express strong interest in buying the company, one of the sources said. It was unclear how formal an overture has been made by any of those suitors--Vodafone PLC of Britain, NTT DoCoMo of Japan, and Nextel Communications of Reston, Va.

The Cingular offer includes a premium over AT&T Wireless' closing market value on Friday of $9.99 per share, or $27 billion, another of the sources said.

However, with shares of AT&T Wireless rising 40 cents to $10.39 on Tuesday, padding last week's 20 percent gain driven by takeover speculation, a prospective buyer may need to exceed the company's new market value of more than $28 billion. In addition, any buyer would also need to assume AT&T Wireless' debts, which totaled $6.1 billion at the end of the third quarter.

Officials from AT&T Wireless and Cingular declined to comment. AT&T Wireless' board of directors was expected to wrap up a previously scheduled meeting in Florida on Tuesday.

Analysts did not expect a deal right away with so many parties showing interest.

While AT&T Wireless has struggled with the industry's price wars and the huge investments needed to expand and upgrade its network, rivals are envious of the company's large base of business customers, who tend to buy higher-priced calling packages and premium services such as wireless Internet access.

"This is going to take a while," said Patrick Comack, a telecommunications analyst with Guzman and Company in Miami. "Vodafone is not going to let this go without a fight. And if they try to fight, NTT DoCoMo will try to block them."

Cingular, jointly owned by SBC Communications and BellSouth, still doesn't own spectrum in several key U.S. markets. A deal with AT&T Wireless, which uses the same cellular technology, could help fill in many of those gaps, while cutting costs for the merged operation.

NTT DoCoMo, a rival to Vodafone in many countries with an eye on expansion, already owns 16 percent of AT&T Wireless and has two representatives on the U.S. company's board.

Vodafone already owns 45 percent of U.S. market leader Verizon Wireless. But as one of the world's biggest cell phone companies, the British firm is said to be dissatisfied with settling for such a passive role in a market as crucial as the United States. Verizon also uses a different cellular technology than Vodafone, while AT&T Wireless uses the same standard, making its network an easier fit for any international services Vodafone might sell its subscribers.

Nextel, meanwhile, doesn't have a high-speed wireless Internet service to offer its sizable base of business customers, a competitive disadvantage that AT&T Wireless recently addressed with a $300 million upgrade to its network.

A merger between Cingular and AT&T Wireless would vault the combined company into the top slot in terms of U.S. market share, while an agreement with Nextel would create a competitor close in size to No. 1 Verizon.

But a deal with either would also slim the field of national wireless carriers from six to five, possibly easing the fierce competition sparked by a new federal rule that lets customers switch carriers without losing their phone numbers.

Atlanta-based Cingular is currently the nation's second-largest wireless carrier with 23.4 million voice and data customers. Verizon, based in Bedminster, N.J., has 36.0 million subscribers, while AT&T Wireless is No. 3 with 21.9 million. All of those tallies were calculated as of the end of September.

Cingular, with annual revenue of about $15 billion, has been adding customers steadily the last several quarters, helping boost the earnings of its parent companies. BellSouth releases its fourth-quarter and year-end earnings on Thursday.

AT&T Wireless, based in Redmond, Wash., has annual revenue of $16.5 billion.

Shares of Cingular's parent companies also rose on the heels of Tuesday's reports. SBC, 60 percent owner of the venture, rose 53 cents to $27.00. BellSouth rose 47 cents to $29.68.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
InformationWeek Is Getting an Upgrade!

Find out more about our plans to improve the look, functionality, and performance of the InformationWeek site in the coming months.

News
Remote Work Tops SF, NYC for Most High-Paying Job Openings
Jessica Davis, Senior Editor, Enterprise Apps,  7/20/2021
Slideshows
Blockchain Gets Real Across Industries
Lisa Morgan, Freelance Writer,  7/22/2021
Commentary
Seeking a Competitive Edge vs. Chasing Savings in the Cloud
Joao-Pierre S. Ruth, Senior Writer,  7/19/2021
White Papers
Register for InformationWeek Newsletters
2021 State of ITOps and SecOps Report
2021 State of ITOps and SecOps Report
This new report from InformationWeek explores what we've learned over the past year, critical trends around ITOps and SecOps, and where leaders are focusing their time and efforts to support a growing digital economy. Download it today!
Video
Current Issue
Monitoring Critical Cloud Workloads Report
In this report, our experts will discuss how to advance your ability to monitor critical workloads as they move about the various cloud platforms in your company.
Slideshows
Flash Poll