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What cell-phone merger means to you
Cingular's surprise acquisition of AT&T Wireless could actually be good news for wireless consumers
February 18, 2004: 8:36 AM EST
By Sarah Max, CNN/Money staff writer

BEND, Ore. (CNN/Money) - While you were sleeping, two of the nation's largest wireless carriers eloped. Early Tuesday morning, AT&T Wireless accepted a $41 billion buyout offer from Cingular Wireless.

The deal, though subject to regulatory approval, is expected to close in late 2004.

The combined company, which will take Cingular's name, will trump Verizon Wireless as the nation's largest wireless provider with 46 million customers, if the deal is completed. The new company will have coverage in 97 of the top 100 U.S. markets, a network that brings it up to par with Verizon's, currently the nation's largest.

"My worry is that this could hurt competition," said Carl Hilliard, president of Wireless Consumers, a nonprofit consumer group.

There are currently six major wireless carriers in the United States Verizon, Cingular , AT&T Wireless, Sprint PCS, T-Mobile and Nextel.

With the second and third largest carriers no longer competing against each other, it's likely that prices won't continue to come down as much as they have in recent years, said Delly Tamer, CEO of LetsTalk.com. He estimates that the average cost per minute has dropped by 50 percent in the last three years.

But while prices are likely to stabilize, they are "definitely not going to increase," said Tamer. Most markets still have several wireless carriers competing for customers' business.

In fact, even though price wars will probably subside, the deal could actually improve competition for some customers, said Patrick McGugan, vice president of operations for Telebright, another site for comparing phone plans and buying packages.

"It's going to give consumers a new choice because now there's competition for Verizon," said McGugan.

For those customers demanding a high-quality coast-to-coast network, Verizon has had little serious competition. To that end, it hasn't had to compete as much on price, said McGugan and other experts.

"This vaults Cingular way ahead of Verizon in terms of network," McGugan added.

While the post-acquisition Cingular and Verizon compete over network quality, the three remaining players are likely to continue trying to grab market share with low-price offers, said Bill Hardekopf, CEO of CellUpdate.com.

"Nextel, Sprint and T-mobile will come out with guns blazing to compete with the much larger competitors," he added.

Finally, better service?

A break in the cellular price war wouldn't be such a bad thing for wireless consumers, whose biggest gripes are often bad coverage and poor customer service.

"The casualty of price war is usually customer service," said McGugan. "I'll be curious to see if support staff for the combined company is enhanced."

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At the very least, said Tamer, the combined company should have a lot of leverage in negotiating with cell phone manufacturers. "That means better prices on really cool phones," he said.

Though Cingular and AT&T haven't said anything about better customer service or phones, they are touting better coverage, improved reliability, enhanced call quality and a "wide array of new and innovative services" for consumers.

Because Cingular and AT&T Wireless use the same GSM wireless technology, the companies said, customers should expect to see immediate improvement in coverage and call quality once the networks are integrated.

Those who follow the wireless industry, however, say the integration might not be quite so seamless.

"Any time you take these very large entities and try to make them one there are problems," said McGugan, adding that Cingular and AT&T are themselves still converting to the GSM format.

Still, there's no denying the benefit of a wireless network that covers 49 states.

"I think the customers of Cingular and AT&T will benefit from better coverage and less roaming fees," said Hardekopf, adding that customers may see additional features. For example, AT&T customers might get Cingular's famous rollover minutes.

"This can only help in terms of approving the quality of AT&T Wireless service," said Hilliard of the acquisition. "The latest Consumer Reports ranked them at the bottom in a number of categories."  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.