Barron's cover story on wireless service providers
Reasonably thorough discussion of current market and relative positions of the various US carriers, and likely consolidation candidates.
online.wsj.com (but requires subscription)
Interesting to see the denial and deceit practiced by AWE. For instance, contrast this quote from the article linked by Benjamin Garrett
Complicating the engineering issues is the fact that GSM is less efficient than TDMA and will demand more base stations than are now built out for existing TDMA networks.
with this paragraph from the Barrons article:
One of the knocks against AT&T Wireless is that its TDMA technology is inferior to CDMA, used by Verizon Wireless and Sprint PCS. But Zeglis says that issue is becoming moot because AT&T, like Cingular, is moving toward the GSM standard dominant in the rest of the world for 3G. Voicestream already uses GSM.
Just as we have accountants poring over questionable transactions, and big scandals about false revenues, the media sensationalists should be calling company managers to task about patently false technology statements.
Other items:
Based on its franchise value, the company does look more attractive because it probably would be impossible to recreate its nationwide network and customer base for anything close to its current enterprise value. Sprint PCS also boasts a national digital network and has a less expensive path to upgrade its services to 3G than does AT&T Wireless. However, Sprint's tracker structure would make it hard for any company to buy Sprint PCS without shelling out for Sprint's other businesses as well.
Several analysts and institutional investors advise avoiding Nextel stock, even at its depressed price, because the heavily indebted company, known for the walkie-talkie feature on its phones and high customer loyalty, may be headed for a restructuring that could wipe out or dilute current shareholders' stakes.
Here is the part on consolidation:
As noted above, consolidation is coming, with the most likely pairings being AT&T Wireless/Cingular or Cingular/Voicestream. Voicestream would be valuable to either AT&T Wireless or Cingular because of Voicestream's GSM technology. AT&T Wireless and Cingular are shifting from TDMA to GSM. Buying Voice-stream would make the transition easier and cheaper.
If AT&T Wireless and Cingular mated, their offspring would be the industry's top dog, with 40 million subscribers. It would save on capital expenditures. But such a combo could spook antitrust regulators because of its sheer size.
Egos also may stand in the way of such a deal because neither AT&T Wireless nor SBC, the dominant partner in the Cingular partnership, may want to cede control. Cingular is slightly larger with 21.6 million subscribers, versus AT&T Wireless's 18 million.
Egos also might preclude a merger between AT&T Wireless or Cingular and Voicestream because Deutsche Telekom's embattled chief executive, Ron Sommer, may not want to admit defeat by selling Voicestream to Cingular or AT&T Wireless at a fraction of its cost. He may not have much choice if Deutsche Telekom can't bring public T Mobile, its global wireless properties, which will include Voicestream. Deutsche Telecom, burdened with $58 billion of debt, has seen its American depositary shares sink to 13 from a 2000 peak of 100.
There's an incentive for AT&T Wireless or Cingular to act because the industry's first merger is apt to get a more receptive hearing from antitrust regulators than the second deal.
Verizon Wireless and Sprint PCS are potential partners because both use CDMA networks and are pursuing similar network upgrade paths to 3G. Such a deal, however, could prompt antitrust objections because of the size of the combined companies.
All the likely scenarios leave Nextel, with its proprietary technology and leveraged balance sheet, out in the cold.
About Verizon:
While not yet public, Verizon Wireless is the industry's class act. Its network is unrivaled in coverage and calling quality. Verizon Wireless's EBITDA of $6 billion last year was tops in the group, and the company was the only major player that generated free cash flow. |
