VoiceStream and At&T Wirless Set to Merge

http://www.msnbc.com/news/778319.asp

VoiceStream Wireless is in talks to merge with AT&T Wireless Services Inc. in a deal that could be valued at more than $10 billion and would create the nation’s No. 2 cellphone company, say people close to the talks.

THE TALKS are very preliminary and may not result in a deal. Both AT&T Wireless and VoiceStream, controlled by Deutsche Telekom AG, have held preliminary talks with a number of companies in recent months but haven’t reached any agreements.
Yet people close to the situation say executives from VoiceStream and AT&T Wireless have been holding discussions about a deal that would combine the companies and make VoiceStream the dominant shareholder.
The talks come amid growing pressure on the nation’s cellphone operators to consolidate and gain market share.
The nation’s six major cellphone companies are all struggling with slowing subscriber growth and soaring costs associated with upgrading to higher-speed networks.
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The companies are also offering lower rates to gain market share, now that about 45% of Americans own cellphones. Competitors have been jockeying to be among the first to strike a deal and avoid being left out of the consolidation.
Investors and industry executives have long been urging consolidation, saying that the industry would be far healthier with two or three players.
A deal between VoiceStream and AT&T Wireless would create the second-biggest player in the industry, with more than 25 million subscribers-just behind Verizon Wireless’s 29.4 million. Both companies use GSM (global systems for mobile communications), which allows the combined company to build only one high-speed network rather than two. The combined company would have annual revenue of over $25 billion and would combine AT&T’s brand name with VoiceStream’s more-global reach.


AT&T Wireless had $13.6 billion in revenue last year and $5 billion in cash. The company recently acquired TeleCorp for $3 billion. VoiceStream, with $4 billion of revenue last year, has among the lowest rates in the business.
AT&T Wireless was spun off from AT&T Corp. last year and its stock has plunged as investors focused more on earnings than the growth-at-any-costs model that many wireless operators were following. At 4 p.m. Tuesday in New York Stock Exchange composite trading, AT&T Wireless was up 11 cents $5.15.
For VoiceStream, the deal would bring much-needed heft in an industry increasingly dominated by giants. When Deutsche Telekom bought VoiceStream in 1999 for $31 billion, Chief Executive Ron Sommer hailed the purchase as the linchpin in the German group’s push to create a transatlantic wireless powerhouse. Instead the deal saddled Deutsche Telekom with debt and hurt its share price, factors that are contributing to the pressure on Mr. Sommer to resign. The German government is still Deutsche Telekom’s company’s biggest shareholder, with a 43% stake.

[Sarasota]

These two could form a very interesting company....

Greg

[IdiOTeQnoLogY]

would be very interesting considering VS is owned by Deutsche Telekom and at&t has a huge stake in it by japan's NTT docomo

[bobolito]

That will definitely be interesting:

Will Voicestream still become T-Mobile?
Will VS customers expand coverage by adding TDMA?
Will the merge be good or bad for Cingular?
Will the AT&T name absorb the Voicestream or T-Mobile name or viceversa?
The article says the deal would make Voicestream the dominant shareholder so that sounds good to me.

as of yesterday the VS store in Tampa's International Mall was planning of gutting the store and becoming T-Mobile befor the end of Sept.

[roamer1]

VS and AT&T talking merger is odd indeed, given that the two don't even roam with each other...

I believe that an AT&T/Cingular merger would be shot down as too big (and AT&T and Cingular have significant 800 MHz overlap, particularly in the Southeast and Texas, that would have to be dealt with...)

-SC

[bobolito]

That's true Roamer. However, a VS/Cingular merger woudn't be bad IMO. They share both of their GSM networks nationwide.

Where are the T-Mobile yuppies. I'd think they would have let us know about this if they were truly with VStreams. Let us know!!

[parthery]

D.T. has been looking to unload their stake in Voicestream...its been a huge $$$ loser for them.

Expect that if this was to occur, the AT&T name, with its worldwide recognition, would survive.

[Matt]

nothing set in stone at this time.....there were whispers about VS/cingular a few months ago since they are already "friends" through roaming agreements and the joint venture.

[aiwapro]

<< Expect that if this was to occur, the AT&T name, with its worldwide recognition, would survive. >>



I don't believe that at all. The T-Mobile name would survive, because Voicestream is already going to be the dominant if the merger takes place, plus I'm sure that AT&T wouldn't mind getting rid of the name since they have nothing to do with AT&T Corp. anymore, especially if they are going from one brand name to another.

[larry]

Does anyone think this merger, (if it happens) will lead to higher prices all around with there being less competition?

[TNDan21]

I don't think it will lead to higher prices as there will still be a lot of competion. Even if AT&T and VoiceStream do merge there will still be 5 national players as well as many smaller local and regional carriers.

[aiwapro]

I hope this merger happens, but in a way that DT would merge the two companies together, thus controlling the joint company and together they can be one, T-Mobile.

<< Does anyone think this merger, (if it happens) will lead to higher prices all around with there being less competition? >>



I DON'T THINK THIS MERGER WILL LEAD TO HIGHER PRICES. I THINK FOR SURE IT WILL LEAD TO "LAYOFFS" AS MOST OFTEN THE CASE DUE TO DUPLICATION OF WORK.

[bobolito]

Although VS would be greatest shareholder, unfortunately the name that would most likely survive is AT&T. Whether we like it or not, we have to be realistic. They will absorb VS and all those good things that VS has right now will dissapear. If the merger goes through I hope it happens the other way around and VS absorbs AT&T, but unfortunately, we have to accept that the AT&T brand sells more in this country.
Voicestream's business ethics and the way they treat their customers is excellent IMO. I would hate to see AT&T getting their hands in such a good company as Voicestream because they can only damage Voicestream's good practices. To me, the merge can only have negative effects on Voicestream, unfortunately translating into higher prices and less freedom to customers (which are well known AT&T attributes).

[aiwapro]

Yeah I hope Voicestream absorbs AT&T too Bobolito. I don't want Voicestream to have anything to do with the practices of AT&T. The articles do say that Voicestream (T-Mobile) would be the dominant, and I'm sure that DT would go through all this rebranding across the whole U.S. if they didn't intend on keeping the name. AT&T Wireless has nothing to do with AT&T anyways, so they may aswell change the name.

[bobolito]

Either that or the AT&T wireless name will become like Cellular One name that nobody knows who owns it.

[Matt]

good posts bobolito....

Chris - T-mobile name will not be used anymore in the US in this case. DT would be selling VS to ATT (even if VS remains the dominant shareholder in the new company.) DT would have no financial interest in VS/ATT, and therefore the new company would not use the Mobile name

[Kenny]

...hopefully, AT&T's good practice of allowing 30 days trial period will rub off on Voicestream and they will follow suit to move from a ridiculous 72 hour trial period to a 30 day one. Hey if AT&T didn't work out for you, great at least they gave a month to try things out...

If they do merge , I hope they also continue with AT&T 's ability to roam as necessary with multi mode . multi band phones with - " extended area " and " roam " .

[amphibian]

http://www.newscuts.com/cgi-bin/read...e.pl?t42355265

VoiceStream U.S. deal 'unlikely'
July 11, 2002 Posted: 1116 GMT

LONDON, England (CNN) -- Sooner or later, as customer growth slows, U.S. telecom companies will begin pairing up. But don't expect to hear wedding bells for AT&T Wireless and VoiceStream.

Despite reports to the contrary, America's No. 3 and No. 6 wireless telephone companies are unlikely to tie the knot, analysts say.

The Wall Street Journal said on Wednesday VoiceStream -- owned by Germany's Deutsche Telekom -- and Redmond, Washington-based AT&T Wireless were discussing a merger.

The possible deal -- which analysts estimate could be worth $10 billion -- would create the second biggest U.S. wireless company behind Verizon Wireless, which is owned by Verizon Communications and Britain's Vodafone Group.

Cingular Wireless, a joint venture of BellSouth Corp. and SBC Communications, would drop to third placed.

Neither AT&T Wireless nor Deutsche Telekom would comment on the report.

But analysts have had lots to say, most of it negative. While they would not be surprised to see VoiceStream up for sale -- given Deutsche Telekom's heavy debt load -- they doubt AT&T would be the buyer.

"We believe that this combination would make very little sense for AT&T Wireless," investment bank Bear Stearns said in a research note.

"While we believe strongly that there will be consolidation in the industry, we find it more likely that Cingular would offer a competing big for VoiceStream before any deal with AT&T Wireless was complete."

VoiceStream, AT&T and Cingular have been often mentioned as likely merger partners because they all operate on the same wireless standard, GSM (for Global System for Mobile communication).

"The primary attributes of VoiceStream is the amount of spectrum they hold," Todd Bernier, wireless analyst with Morningstar, told Reuters, adding that over half of VoiceStream's spectrum or airwave rights remain unused.

"They're spectrum rich and customer poor, so if you align them with someone else, the obvious fit would be someone who is spectrum poor and customer rich, and that's Cingular."

Bernier said AT&T Wireless already has enough spectrum to operate for at least the next several years and VoiceStream's network would overlap with its own.

Beyond the AT&T and VoiceStream situation, however, mergers within the telecom industry are inevitable.

"Pricing is terrible in this industry. Pricing doesn't get better until there is consolidation. The sooner, the better," Ken Turek, co-manger of the Northern Global Communications fund, said.

Indeed, companies throughout the sector are struggling because there are too many companies chasing too little business.

Long distance and wireless carriers have to keep slashing rates to remain competitive. And that hurts their profit margins. In addition, many upstart phone companies failed to make major inroads against the long distance giants and their smaller rivals and have gone bankrupt.

Because of the poor fundamentals, the surviving carriers have been cutting back on capital spending, which has caused major damage in the telecom equipment sector.

Consolidation among wireless companies probably will happen first simply because that is where there is the most overcapacity.

"The U.S. wireless market is peculiar because it has six national wireless providers and six is probably too many. Most other countries have just a couple," said Mark Schultz, portfolio manager with M&T Asset Management, which runs the Vision family of funds.

Aside from Cingular, AT&T and VoiceStream, there also has been speculation that some combination involving Sprint PCS, Verizon and Nextel could take place since they operate on a different competing standard known as CDMA (Code Division Multiple Access).

In the long distance area, WorldCom's woes could force it to sell off assets piecemeal, says Patrick Comack, an analyst with Guzman & Co.

But Comack says he doubts that the other two long-distance companies -- AT&T and Sprint -- will be sold in the near future unless they run into similar problems as WorldCom.

The reason? While the many smaller companies covet the corporate customers that WorldCom, AT&T, Sprint have, none are likely to want to acquire their networks or have to absorb their debt.

"Consolidation will happen not necessarily through company acquisitions but through the purchase of assets in bankruptcy court," Comack says.

But some analysts say it is too risky for investors to try and pick companies that might get taken over.

Even if there is a wave of mergers, the stock prices of the likely buyers and sellers are much lower than they were two years ago, or even last year. And deals being done out of necessity are not likely to reward shareholders.

Just look at VoiceStream for example. Deutsche Telekom acquired VoiceStream in 2000 for about $31 billion. But if estimaes are correct the value of a possible AT&T-VoiceStream merger would be just $10 billion.

--CNN/Money contributed to this article

[aiwapro]

<< "They're spectrum rich and customer poor, so if you align them with someone else, the obvious fit would be someone who is spectrum poor and customer rich, and that's Cingular." >>



This makes since, and I wouldn't mind seeing this happen if Voicestream could keep running their business the way thatthey are doing it, and have Cingular follow suit, and also keep the Voicestream name.

<<

<< "They're spectrum rich and customer poor, so if you align them with someone else, the obvious fit would be someone who is spectrum poor and customer rich, and that's Cingular." >>



This makes since, and I wouldn't mind seeing this happen if Voicestream could keep running their business the way thatthey are doing it, and have Cingular follow suit, and also keep the Voicestream name. >>