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Posted on Wed, May. 26, 2004

Cingular to sell networks to rival


Mercury News

The parent company of wireless phone carrier T-Mobile USA said Tuesday it would acquire the California and Nevada networks of rival Cingular Wireless for about $2.5 billion.

The two companies will also dissolve a nearly 3-year-old network-sharing agreement.

The changes shouldn't affect customers of T-Mobile or Cingular in any noticeable way, both companies said.

That's because Cingular, a joint venture between SBC Communications and BellSouth, is acquiring AT&T Wireless, which will boost the capacity of Cingular's cellular network. Cingular will also have the right to continue using the network being sold for up to four years.

T-Mobile's calls in California and Nevada are already being carried by Cingular's wireless network, thanks to a joint venture the companies formed in 2001 to share networks in those states and the New York area.

``Customers should not notice anything. They will not have to buy new phones'' or be switched to different carriers, said Cingular spokesman Clay Owen. ``We're trying to make this as transparent as possible.''

The deal, which would probably not take effect until 2005, is contingent upon federal regulators approving Cingular's proposed purchase of AT&T Wireless. A decision is expected this fall, Owen said.

Some industry observers said Cingular was motivated to end the joint venture and sell its California and Nevada networks to T-Mobile parent Deutsche Telekom to improve its chances of gaining antitrust approval for the AT&T Wireless deal from the Justice Department and Federal Communications Commission.

``Continuing this agreement would have led to some questions about the competitive environment,'' said Charles Golvin, a telecommunications analyst at Forrester Research. ``To make the waters as clean as possible, it made sense to unwind this.''

The joint venture between Cingular and T-Mobile was formed in 2001 to help the companies fill holes in their networks and launch service in new areas faster than if they had to build infrastructure from the ground up, said T-Mobile spokeswoman Kim Thompson.

T-Mobile had no networks in California and Nevada. Cingular owned no network in New York City.

But with the pending acquisition of AT&T Wireless, which has networks in all those areas, Cingular no longer needed the joint venture.

As part of the transaction announced Tuesday, Deutsche Telekom will also pay Cingular $180 million for additional 10 megahertz of wireless spectrum in San Francisco, Sacramento and Las Vegas. Additional spectrum increases a company's capacity to carry voice calls and other wireless services.

T-Mobile will also transfer some spectrum to Cingular in New York.

``In some sense the biggest impact here is T-Mobile is getting a lot more spectrum to build out its network in California,'' Briere said. ``It has been growing at a huge pace in California.''

Cingular, known for its ``rollover minutes'' calling plans, is the country's second-largest wireless carrier, with nearly 25 million customers. T-Mobile -- perhaps best known for its ads featuring actress Catherine Zeta-Jones -- is the fifth-largest carrier, with about 14 million subscribers. Verizon, which has about 39 million subscribers, is the largest.

Contact Sue McAllister at or (408) 920-5833.

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