Cingular plans technology overhaul - No major surprises

[Kenny]

Cingular plans technology overhaul

Multibillion-dollar plan targets next-generation wireless

By Shawn Young
THE WALL STREET JOURNAL

NEW YORK, Oct. 30 — Cingular Wireless, the nation’s second-largest provider of wireless-phone service, is expected to announce a sweeping, multibillion-dollar overhaul of its technology to help it offer next-generation wireless data services, people familiar with the matter say.

CINGULAR, OF ATLANTA, is a joint venture of SBC Communications Inc., San Antonio, and BellSouth Corp., Atlanta. Cingular’s network, which has 21 million subscribers, uses old-fashioned analog cellular technology and two different digital systems.
Officials are expected to announce Tuesday that Cingular will convert its entire system to one of those digital formats — known as global system for mobile communications, or GSM.

The shift, which comes as phone carriers and telecommunications-equipment concerns cut back on spending, will cost slightly more than $3 billion, these people say. Cingular executives are expected to make the announcement in New York with equipment vendors Telefon AB L.M. Ericsson of Sweden, Finland’s Nokia Corp. and Germany’s Siemens AG, all of which make gear for GSM technology. SBC owns 60 percent of Cingular, while BellSouth has a 40 percent stake. The companies involved declined to comment or couldn’t be reached for comment.

The expected move will help spread the use of GSM, the standard for much of the world, in the U.S. and is designed to pull Cingular together technologically and move it away from its other leading technology, called TDMA, or time-division multiple access.

TDMA is a declining technology that researchers and equipment makers have been de-emphasizing. The No. 3 wireless-service provider, AT&T Wireless Services Inc., of Redmond, Wash., is leaving TDMA behind as part of its own wide-ranging update. And VoiceStream Wireless, the wireless unit of Germany’s Deutsche Telekom AG, also uses GSM.

“Having another big company join the GSM crowd adds to the legitimacy of that decision,” says AT&T Wireless spokesman Rich Blasi. “By moving to GSM, you’re moving to what is pretty much already the world standard.”

The U.S. quickly is dividing up between GSM camps and those companies using code-division multiple access technology, such as Sprint PCS, the No. 4 wireless-services provider and a unit of Sprint Corp., and Verizon Wireless, the No. 1 wireless-services provider and a joint venture of Verizon Communications Inc., of New York, and Britain’s Vodafone Group PLC. GSM has been picking up momentum in the U.S., as its boosters argue that if the technology becomes the world standard, they will get better deals on handsets and software.

Cingular will convert the 70 percent of its network that operates on TDMA or analog technology to the new system, people familiar with the plans say. The company also plans to unveil a faster version of its existing data service, these people said.

“Everyone knew Cingular would have to go this route,” said Kevin Roe, a telecommunications analyst at Dutch investment bank ABN Amro.

Cingular tipped its hand about its plans in its recent alliance with VoiceStream. The two companies said this month that they would share mobile infrastructure in New York, California and Nevada.

Such a deal in such crucial markets as New York was “very obviously a hint” about Cingular’s intentions, Roe says.

The decision could be bad news for Lucent Technologies Inc. The Murray Hill, N.J., maker of telecommunications equipment is Cingular’s largest supplier of TDMA equipment, it has been grappling with massive losses and it has said it won’t develop new GSM technology. A Lucent spokeswoman said the company has an existing contract with Cingular and will continue to work with the company.