Cingular, AT&T Wireless in Merger Talks

[ComicalMoodyDan]

04/15 10:23
Cingular, AT&T Wireless in Merger Talks, People Say (Update3)
By Lisa Levenson


Redmond, Washington, April 15 (Bloomberg) -- AT&T Wireless Services Inc., the third-largest U.S. mobile-phone carrier, is in merger talks with larger rival Cingular Wireless, people familiar with the companies said.

Talks are preliminary and no transaction is imminent, they said. SBC Communications Inc. owns 60 percent of Cingular, and BellSouth Corp. owns 40 percent. They share management control.

U.S. wireless companies are expected to add customers at the slowest rate ever this year, which may spur consolidation as carriers try to cut expenses, analysts said. AT&T Wireless, with a market value of $22 billion, and Cingular, the second-biggest U.S. mobile-phone provider, would pare costs by operating a larger network and eliminating sales and marketing duplications.

``Cingular will be a prime candidate looking to merge with someone who has a complementary set of assets,'' said Bryan Krause, an analyst at State Street Research & Management Co., the owner of 252,380 BellSouth shares and 2.36 million SBC shares as of December.

Spokesmen for Cingular, AT&T Wireless, SBC and BellSouth declined to comment.

Together, AT&T Wireless and Cingular would be able to save money by purchasing equipment in larger quantities, said Prudential Securities Inc. analyst Chris Larsen, who rates AT&T Wireless ``hold'' and doesn't own the shares. Both companies use the same network technologies.

The combined company would spend less on advertising and promotion, with one brand instead of two, Larsen said.

Shares

Shares of Redmond, Washington-based AT&T Wireless rose 33 cents, or 4 percent, to $8.51 in midmorning trading. They had dropped 59 percent in the past year, and are valued at less than a third of their April 2000 initial public offering price.

AT&T Wireless's 7 7/8 percent coupon notes maturing in 2011 rose to $991 per $1,000 face value from $989, pushing down the yield to 8.02 percent from 8.06 percent. The spread, or premium to U.S. Treasuries, narrowed 5 basis points to 285 basis points, traders said. A basis point is 0.01 percentage point.

Cingular doesn't have publicly traded shares, making a combination ``challenging from a structural standpoint,'' Krause said. The company's 6.5 percent coupon notes due in 2011 declined to $964 from $967, increasing the yield to 7.02 percent from 6.98 percent. The spread widened 3 basis points to 185 basis points, traders said.

Shares of San Antonio-based SBC slipped 13 cents to $33.87, while Atlanta-based BellSouth fell 15 cents to $31.93.

Japan's NTT DoCoMo Inc. owns about 16 percent of AT&T Wireless. The company's shares rose 4,000 yen, or 1.3 percent, to 320,000 in Tokyo. DoCoMo hasn't heard of any talks, spokesman Takumi Suzuki said.

``Our stance on AT&T Wireless remains the same,'' Suzuki said. ``It is the most important operating base for us to do business in North America.''

Falling Prices

Six U.S. wireless companies, including AT&T Wireless and Cingular, operate nationwide or in large parts of the country. Per- minute calling prices have declined 13 percent in the past six months as they vie for customers, according to market researcher ARS Inc.

Customer growth is expected to be as low as 13 percent this year, down from 18 percent in 2001, Larsen said. Mergers would help reduce price-cutting and customer defections by lowering the number of competitors, he and other analysts said.

AT&T Wireless and Cingular in January agreed to share the cost of building a network along 3,000 miles of highway in the U.S. Midwest and West. The venture, a test of how the companies work together, might presage a merger, analysts said at the time.

Aside from joining forces on network construction, wireless companies are cutting costs by firing employees or not adding workers. Sprint Corp.'s PCS Group said in February it would eliminate 3,000 jobs and close five customer-service centers.

Regulations Lifted

Federal rules limiting the amount of airwaves each company may control in a single market will be lifted in January 2003, paving the way for combinations among wireless companies that use the same technology, analysts say.

Verizon Wireless Inc., a venture of Verizon Communications Inc. and Vodafone Group Plc, is the largest U.S. mobile-phone company, with 29.4 million customers as of Dec. 31. Cingular has 21.6 million subscribers, followed by AT&T Wireless with 18 million. Verizon Wireless operates a different type of network than Cingular and AT&T Wireless.

AT&T Wireless began talking to Cingular after discussions stalled with Deutsche Telekom AG's VoiceStream Wireless Corp., the people familiar said. VoiceStream spokeswoman Kim Thompson declined to comment.

VoiceStream uses the global system for mobile communications, or GSM, technology that AT&T Wireless and Cingular are installing. Currently, AT&T Wireless and Cingular use time-division multiple- access, or TDMA, technology in some markets, and GSM in others.



Cingular, AT&T Wireless in Merger Talks

[KevinJames]

There is already a discussion (thread) going on in the Western Forum about this. Though I do agree it is better suited in this forum.