Cingular's $41 Billion Lemon?

[David McNamee]

<div class='os_post_top_link'><a href='http://www.siliconvalley.com/mld/siliconvalley/8323105.htm' target='_blank'>http://www.siliconvalley.com/mld/siliconvalley/8323105.htm</a><br /><br /></div>Cingular might be feeling some buyer's remorse. Reports indicate that AT&T Wireless is losing upwards of 150, 000 subscribers per month, setting up what is expected to be the wireless provider's first quarterly loss. Verizon, on the other hand, claims to have gained 10 subscribers for every one that has used phone number portability rules to leave the carrier. <br /><br />This certainly doesn't look good for Cingular. There's going to have to be a lot of work done for the combined Cingular-AT&T to be a strong company. Taking on a strengthening Verizon won't make it any easier.

[ShivShanks]

Cingular might be feeling some buyer's remorse. Reports indicate that AT&T Wireless is losing upwards of 150, 000 subscribers per month, setting up what is expected to be the wireless provider's first quarterly loss. Verizon, on the other hand, claims to have gained 10 subscribers for every one that has used phone number portability rules to leave the carrier.

This certainly doesn't look good for Cingular. There's going to have to be a lot of work done for the combined Cingular-AT&T to be a strong company. Taking on a strengthening Verizon won't make it any easier.

All I can say is I told you so. AT&T Wireless and the Cingular merger is going to cause nothing but trouble. Expect the acceleration of people leaving AT&T to increase even more. Microsoft couldn't have found a worse partner than AT&T to launch Smartphones. AT&T WS has just shot itself very badly in the foot. Whats more AT&T (the main company, which is seperate from AT&T Wireless) is concerned about the erosion of its brand this way and will relaunch the AT&T Wireless brand after the Cingular takeover is finalized. They will relaunch AT&T Wireless as a MVNO (Mobile Virtual Network Operator). Thats basically someone who uses somebody else's network to run wireless services but with their own branding. For example Virgin Mobile which uses Sprint's network. In fact the main AT&T CEO has been bragging that he would get quite a few of the old AT&T Wireless customers -
http://news.com.com/1604-2-5182786-2.asx?tr+win

With the already huge defections taking place from AT&T and the potential for quite a few more when AT&T Wireless relaunches, Cingular must be wondering just what is that it paid so much money for. Vodafone investors must be laughing all the way to the stock market. If you are an AT&T Wireless subscriber it would be prudent to start researching alternatives since it seems the ship is sinking.

[Mike Temporale]

``Cingular knew how bad January was (for AT&T Wireless) before they signed the deal,'' said Phil Cusick, an industry analyst for Bear Stearns who now estimates that AT&T Wireless will show a net loss of 200,000 customers for the quarter. ``They'd have to lose about 5 million customers before they impair the value of this business by 10 percent. I think that's really unlikely,'' he said, referring to a reported escape clause in the deal.

In the third quarter of 2003, AT&T Wireless was losing an average of nearly 600,000 customers per month, but was signing up enough new subscribers to show a net gain of 229,000 for the period. That ``churn'' rate grew to more than 700,000 per month in the fourth quarter as the new phone number rules went into effect, but AT&T Wireless still showed an overall gain of 128,000 customers.

If you are an AT&T Wireless subscriber it would be prudent to start researching alternatives since it seems the ship is sinking.

I agree the ship is sinking, but I think they will be able to repair the damage and get things pointed in the right direction. If 5 million customers equals a 10% impact of their business, then they have lots of time to figure out what is wrong and fix it.

[possmann]

MS should have gone with T-Mo for a strong partnership in wireless - not only is T-Mo great here in the USA, but has a strong presence in Europe as well...

AT&T? Was only US based - IMHO, it was a dumb move.

I have to hope on the I told you so bandwagon on this one as well... :roll: