Cingular, VoiceStream To Save Big Bucks in Network-Sharing Deal

[Kenny]

By Jay Wrolstad
www.WirelessNewsFactor.com,
Part of the NewsFactor Network

October 15, 2001

Although both companies will buy network services from the infrastructure joint venture, each company will retain its own licenses for wireless voice and data services.

A deal between two major U.S. wireless carriers that gives each access to the other's networks in lucrative markets was announced Monday by Cingular Wireless and VoiceStream Wireless.

According to terms of the agreement, the two companies have entered into an infrastructure joint venture that will allow Cingular to offer service in New York City and will let VoiceStream provide service in California and Nevada. By sharing their existing infrastructure in those areas, the companies estimate that they will each save hundreds of millions of dollars in capital expenditures and operating expenses.

Faster, Cheaper Market Entry

"This is an innovative way for us to get into the New York City market faster and cheaper than if we had to build out our own network there," Cingular spokesperson Clay Owen told Wireless NewsFactor. "It also gives both companies more spectrum to work with." The deal, which does not require approval by the Federal Communications Commission, should be completed by the second quarter of 2002, Owen said.

Consumers in the targeted markets will have a choice between Cingular and VoiceStream wireless services, the companies said. The existing networks in those markets -- which include three of the nation's top ten -- will cover more than 55 million people.

GSM Network Sharing

Cingular, a joint venture of SBC Communications (NYSE: SBC) and BellSouth (NYSE: BLS), operates both GSM (global system for mobile communications) and TDMA (time division multiple access) networks. VoiceStream, a subsidiary of a Deutsche Telekom (NYSE: DT), operates an all-GSM network.

The companies said this 50/50 joint venture will allow them to share their GSM network infrastructure in New York, California and Nevada.

Adopted by more than 170 countries, GSM is the most commonly used wireless technology worldwide and gives customers the option to use their mobile number and services when traveling internationally to and from the United States.

Retaining Independence

Although both companies will buy network services from the infrastructure joint venture in the affected markets, each company will retain its own licenses for wireless voice and data services. In addition, each will retain independent marketing initiatives using its own brand name.

While Cingular gains access to the coveted New York City area, VoiceStream gets an opening in all of California's major markets, including Los Angeles and San Francisco, Owen said.

Principal Parties Agree

Financial terms of the deal were not disclosed. The agreement has been approved by Deutsche Telekom, SBC and BellSouth, the companies said.

Cingular Wireless, with headquarters in Atlanta, Georgia, is the second largest wireless carrier in the United States with more than 21 million customers in 38 states. The company posted 2000 revenue of US$12.6 billion.

Bellevue, Washington-based VoiceStream has 6 million customers, and the company and its affiliates own licenses to provide service to more than 97 percent of the U.S. population.

[larry]

This sounds a little odd. Can Cingular's network handle the call volume on their system if they are sharing it with VoiceStream and vice versa?

[Matt]

Two items on this Larry - the companies are pooling their spectrum - so there will be 40 MHz total in each market (FCC limit is 45 right now, and both companies owned 10-15 MHz in the markets they didn't already serve). Also, they will be putting money into the joint venture to buy more network equipment, etc.

There shouls be some stuff on the SEC's website about this - just have to find it.