Subject: [NEXTEL-1] AT&T Wireless Pulls Back on Push-to-Talk

From: [email-masked]
Date: Fri, 23 Apr 2004 15:25:49 -0400

Scott Moritz
AT&T Wireless Pulls Back on Push-to-Talk
By Scott Moritz
TheStreet.com Senior Writer
4/23/2004 2:31 PM EDT
URL: http://www.thestreet.com/tech/scottmoritz/10156283.html

AT&T Wireless (AWE:NYSE) is waving a white flag on the walkie-talkie
front.

The teetering Redmond, Wash., wireless giant had planned to introduce
two-way radio service this quarter. But executives on a conference call
with analysts Friday said there had been a change of plan. Instead of
preparing their own offering, AT&T Wireless executives said they would
work with other carriers to develop a common platform -- delaying the
project indefinitely.
To some observers, the move is just a case of a few more wheels coming
off the nation's No. 3 wireless player. But others say the decision is a
wise concession given AT&T Wireless' pending merger with Cingular, a
joint venture of SBC (SBC:NYSE) and BellSouth (BLS:NYSE) .

"AT&T Wireless is working hard not to look like a lame duck, but I think
it is wise for them to wait on push-to-talk," says Yankee Group's Roger
Entner. "It takes a lot of focus, energy and money to launch this
service."

Bailing out of the solo effort isn't exactly surprising, especially now
that Nextel (NXTL:Nasdaq) has virtually run away with the market, say
analysts.
A bold illustration of Nextel's dominance of the push-to-talk technology
came Thursday, as Nextel tripled its profit in the first quarter ended
in March. Nextel's lucrative business users and government customers
have found the pricey but addictive walkie-talkie service indispensable,
helping the company to reap big proceeds, say analysts.

Users liken the immediacy of push-to-talk communication to AOL's instant
messenger. IM's rocketlike acceptance was attributable in part to its
being free -- but also to its value in making customers ever more
connected. As described by Metcalfe's law, the value of a network
increases dramatically as its number of users grows.

"Nextel has benefited from the friends-and-family effect, where everyone
wants to be part of the group and are unwilling to leave," says wireless
strategist Martin Dunsby with inCode.

Industry observers say the early walkie-talkie efforts from Sprint
(FON:NYSE) and Verizon (VZ:NYSE) have done little more than validate
Nextel's technological superiority.

"They can't build a better mousetrap or differentiated push-to-talk
service," says Dunsby. "So the best thing Nextel's challengers can hope
for is building their own interoperable walkie-talkie systems to help
boost revenue."

But don't expect any help yet from Nextel on compatibility, says
Yankee's Entner. Even though the Justice Department is reviewing the
push-to-talk business, industry experts say there's no rule that says
Nextel must open its system to rivals.

"It wouldn't be smart, financially, for Nextel to be interoperable with
other carriers until they have five or six million push-to-talk users,"
says Entner.

Hand it to AT&T Wireless -- they know when to call it quits

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