Subject: [NEXTEL-1] PBS- WIRELESS REVOLUTION

From: Marcelrf <[email-masked]>
Date: Wed, 18 Feb 2004 16:45:12 -0500

WIRELESS REVOLUTION

February 17, 2004

The proposed merger between Cingular and AT&T Wireless may reshape the
fiercely competitive cell phone market. Ray Suarez discusses the
proposed union between the second and third largest U.S. wireless
carriers with industry analyst Charles Golvin of Forrester Research.

RAY SUAREZ: The merger between Cingular, the nation's number- two cell
phone provider, and number-three provider AT&T Wireless could reshape
the fiercely competitive cell phone market.  We should say that Cingular
is owned by NewsHour underwriter, SBC. The new company will go by the
name Cingular, have about 46 million customers in the U.S., and have a
network that covers 49 states.

Here to discuss the merger and its potential impact on consumers and the
industry is Charles Golvin, a principle analyst covering the wireless
industry at Forrester Research, an independent technology consulting
company. So, Charles, Golvin, multiple companies were in the hunt for
AT&T. How did Cingular win out?

CHARLES GOLVIN: Well, ultimately Cingular won out because they offered
the most money. I believe there was also some slight of hand in trying
to turn the time difference between the U.S.  and the U.K. where Voda
Phone is placed and they were able to place a last minute bid to top the
dollar that Voda Phone had offered.

RAY SUAREZ: Why was AT&T wireless such an attractive takeover target for
these two companies?

CHARLES GOLVIN: Well, AT&T Wireless was the only independent with the
largest market share not someone with an alliance with an existing wire
line provider like Cingular and Verizon wireless. And, ultimately, AT&T
decided they could get the most value from their longstanding investment
by selling the company today. And absent the opportunity to grow
organically, just by adding more subscribers through their daily
efforts, this was the greatest opportunity any of these carriers had to
really jump market share and extract a bigger piece of the pie.

RAY SUAREZ: Well, if you're a customer with either, will you find, if
the merger goes ahead, that the two mesh easily? Do they use similar
systems, similar towers, similar networks, similar hardware?

CHARLES GOLVIN: They do operate the same kinds of networks. Actually,
both companies operate two different technologies today and they're
migrating from the old to the new. But in both cases, it's the same.
I think the main thing that customers of Cingular and AT&T Wireless are
going to experience as the primary benefit is that the overall call
quality and service quality is going to improve fairly significantly.
That's because the two companies have different towers in the same
places by and large, and now customers from both companies can share all
the wireless spectrums that they own so it can be more evenly divided
among a more even base of customers and more spectrum is available. More
spectrum means more call capability and so that means fewer dropped
calls, better chance your calls go through and stay on.

RAY SUAREZ: Should customers either with other wireless companies or
with the two involved in the merger worry about a smaller number of
companies creating less incentive for price competition and less
incentive for technical innovation?

CHARLES GOLVIN: Well, on price competition, I don't think so. We still
have five national wireless carriers today. They're all quite aggressive
in trying to win customers. In fact, today, more and more of the
customers that they're after are existing wireless subscribers with
their competitors and they're very aggressive in trying to win those
over. So price competition I think is something we are going to continue
to see just because there are a lot of players out there.But on the
point of innovation, I think that because these two large players,
Verizon and Cingular have parent companies who are regional Bell
operating companies who own the fixed lines into most consumers' homes
and the pain that those companies feel today more than anything else, is
the loss of those lines and their core business.

I think that the innovation we see from these two larger providers is
really going to be focused on applications, services that give consumers
an incentive to buy both wireless and wire line services from the same
provider, from Cingular and SBC, if you live in California or Texas,
from Cingular and BellSouth if you live in the Southeast -- from Verizon
and Verizon Wireless if you are in the Northeast. And as a result, we
are not going to see the same focus on pure wireless innovation and new
wireless services that we would have seen from a company like AT&T
wireless which was a stand-alone wireless company and no fixed line
investments that they had to protect.

RAY SUAREZ: So we are not seeing, for example, large numbers of
consumers deciding to do without a hard wire phone all together and just
having their cell phone be their phone?

CHARLES GOLVIN: Well, today we have about 4 percent of U.S. households
tell us that they have a wireless phone and no fixed line phone. So it's
not a gigantic number today. It is growing rapidly. But these customers
who are cutting the cord, if you will, are primarily doing so for cost
saving reasons. They're not the customers who spend the most with
wireless companies.
But in the future, we are going to see more and more young people who
simply never get a land line phone. And that is really the greater
threat to these fixed line operators is this young -- young
professionals who move into the work force and already have a wireless
phone that is the number where everybody knows how to reach them and
simply have little motivation to actually go to their fixed line
provider and get a home line installed.

RAY SUAREZ: Before this merger becomes an accomplished fact, it has to
clear regulatory hurdles. Should they be worried when number two and
number three merge to create a new number one that it just might not get
past the regulators?

CHARLES GOLVIN: I don't think that the regulatory hurdles are going to
be all that significant in this case. Again, we do have other national
wireless providers like Nextel and Sprint PCS and T-Mobile. It would be
a problem if they limited the choices to two or three, but with five
competitors I don't think that will be a significant concern and I don't
think the regulatory concerns about spectrum ownership, which have
inhibited mergers in the past are going to be an issue at all because
those barriers have been removed by the FCC by a previous ruling.

RAY SUAREZ: Quickly, what about the other companies in this business, do
they start looking for merger or acquisition targets as well?

CHARLES GOLVIN: Well, one of the big challenges with mergers in the
wireless space is that U.S. carriers use multiple technologies. And
there isn't any synergy in bringing two companies together if their
basic technologies are not the same. Now the smaller carriers that are
out there today, T-Mobile, Nextel and Sprint all use different
technologies. So none of them can actually get together in a very
synergistic way and create a competitor which comes close to the numbers
that Cingular and Verizon have.

I think we will see over the next several years, although not
immediately, a number of other mergers and acquisitions. Initially these
will be big buying small so small regional carriers being swallowed up,
but I believe in the future we will see another large acquisition that
will reduce the number of national carriers down to four or even
possibly three.

RAY SUAREZ: Charles Golvin, thanks for joining us.

CHARLES GOLVIN: My pleasure. Thanks for having me.

 http://www.pbs.org/newshour/bb/business/jan-june04/wireless_02-17.html

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