On 17 February 2004, Cingular Wireless announced an agreement to acquire AT&T Wireless for $15 per share, or $41 billion. The combined company would have 46 million customers and a combined 2003 revenue of more than $32 billion. 
Gartner believes that this acquisition, which the Federal Communications Commission is likely to approve, signals the start of increasing wireline and wireless carrier consolidation through 2008. We expect that the next likely merger will be of Sprint PCS and Nextel Communications. Nextel offers an attractive enterprise customer base, but lacks global scale for its iDEN technology and capital for its third-generation buildout. T-Mobile stands to be the most isolated of the remaining wireless providers. Cingular could drop its roaming relationships with T-Mobile, jeopardizing T-Mobile's position as the only other national Global System for Mobile Communications (GSM) provider in the United States. The acquisition also highlights a trend toward regionalism as wireline carriers guard their subscriber bases in anticipation of wireline-to-wireless migration. Vodafone, owner of a 45 percent stake in Verizon Wireless, has likely missed its last major chance to showcase its GSM technology in one of the world's most important markets. NTT DoCoMo's diluted stake in the venture and lack of success in transplanting its i-mode technology lessens its influence in the United States. The new company faces several short-term challenges, which will be of particular concern to enterprises. Gartner expects that debt accumulated from the acquisition will force an initial public offering by the combined entity by mid-2005, and that operational efficiencies and major changes to business and consumer offerings won't take effect until 2Q06. Cingular must reconcile its offerings if it plans to take advantage of AT&T Wireless' expertise with business customers and in mobile data. Enterprises deploying BlackBerry devices must ensure that support is contracted through Research In Motion (RIM), rather than Cingular or AT&T Wireless, and negotiate grace periods in billing cycles during the transition. Cingular and AT&T Wireless customers should expect some delays in coverage and service issues during the merge of operations. But they should also expect overall better coverage by mid-2005 and 5 percent to 10 percent annual price reductions in mobile voice services through 2007. Other carriers, particularly Verizon Wireless, will likely pick up subscribers, as Cingular and AT&T Wireless form a new management and operational structure. Analytical Sources: William Clark, Phillip Redman, Tole Hart, Michael King and Nick Jones Recommended Reading and Related Research (You may need to sign in or be a Gartner client to access all of this content.)
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