AT&T/VoiceStream Rumors Rife

The market is once again buzzing with the prospect of a merger between AT&T Wireless Services Inc. (NYSE: AWE) and Deutsche Telekom AG's (NYSE: DT) U.S. subsidiary VoiceStream Wireless Corp., after a report in today's Wall Street Journal reported that the two were in preliminary talks.

Its been widely rumored for a while now that AT&T Wireless, VoiceStream, and maybe even Cingular Wireless have been considering the possibilities of a merger (see AT&T and Cingular: Hot for VoiceStream?). "It is like open dating season," says Roger Entner, program manager of Yankee Group’s wireless/mobile services research and consulting practice. "They're trying to figure out who clicks with who."

However, while the analysts Unstrung spoke to all agreed that AT&T and VoiceStream have definitely been sniffing 'round each other, they questioned how big a role VoiceStream would play in any merged company, how much Deutsche Telekom could expect to raise from the sale, and the timing of any actual M&A activity.

The WSJ article cites sources that claim VoiceStream would become the dominant shareholder in the new company. "That's pure Ron Sommer [DT's mercurial CEO, currently facing renewed calls for his resignation] lore," snorts Entner. "I just don't see it -- VoiceStream is one third the size of AT&T Wireless."

"It’s very strange," agrees Tim Farrar, principal consultant at Analysys Consulting. He suggests that the timing of any acquisition is likely to be determined by how much DT can get for VoiceStream, which was lauded as a jewel in a transatlantic crown when the German firm bought it for $31 billion back in 1999.

Reports suggest the current acquisition target will be somewhere between $10 billion and $15 billion. Farrar says that DT may try to hang on for a better price because it will be an embarrassing admission of failure to sell its jaded jewel for less than half the price it paid for it. However, this all depends on what happens between DT and the German government.

There are logical technological reasons why AT&T Wireless, VoiceStream, and perhaps Cingular could hook up. VoiceStream is arguably the most experienced GSM carrier in the U.S., while the other two are relatively new to GPRS/GSM and also run a tangle of TDMA and analog networks across the country. The only major stumbling block there is that Cingular is running its GSM networks at 850 MHz, rather than the 1900MHz range more commonly used in the Americas.

Most analysts agree that with six major carriers in the U.S the market is over-saturated and there will be degree of consolidation. However, while talks go behind the scenes, mergers are unlikely to be announced before the Federal Communications Commission (FCC) lifts the last vestiges of the spectrum cap on January 1, 2003. The spectrum cap ruling was originally intended to promote competition by not allowing any one carrier to own too much bandwidth. However, there are now too many carriers.

Spokespeople from AT&T Wireless and VoiceStream refused to comment on the reports of merger talks.

— Dan Jones, Senior Editor, Unstrung
herbied 12/4/2012 | 10:06:02 PM
re: AT&T/VoiceStream Rumors Rife Cingular/ATTWireless/VoiceStream/Nextel will all come together for one service based on GSM/GRPS/W-CDMA.

Verizon/Sprint/Alltel/USCellular will all come together for another service based on CDMA/CDMA200X.

Microsoft will have a nationwide WiFi-based LAN service based on UltraWideBand from TimeDomain.
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