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AT&T-BT wireless merger to spawn new heavyweight?

Together the companies could spark TDMA-GSM convergence

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Analysis The new buzz around Bell Atlantic-Vodafone negotiations had hardly started, before the merging of the wireless operations of AT&T and BT replaced it as the most high-profile attempt to attain truly global mobile coverage. Interestingly, these two possible deals highlight many of the hotly debated issues among mobile operators. Vodafone-Bell Atlantic negotiations are chiefly aimed at giving Vodafone national CDMA coverage in the US. Vodafone currently has a strong presence in the Western states via the Airtouch network it purchased earlier -- now it needs coverage in the Eastern half of the continent. Time is probably running out. AT&T and Sprint are mopping up customers by offering nationwide wireless coverage and bundling the billing of mobile phone calls with long distance and even internet and cable services. Nextel is still going strong with its own nationwide network. Voicestream has emerged as the fourth contender for the status of a national wireless operator after it acquired Omnipoint's coveted East Coast network. This means that CDMA, TDMA/AMPS, iDEN and GSM all now have more (CDMA) or less (GSM) nationwide champions. Where does this leave regional operators? If four digital standards are now reaching a critical, nationwide mass -- what exactly can smaller operators offer? Not much -- and that's why Vodafone needs to pair off its Airtouch network with the BAM mobile network. Together, they would make up a second national CDMA operator and might give Sprint pause. Separately, they may start to slowly wilt among the literally dozens of regional mobile operators in USA. Whatever happens, Vodafone is stuck with one intractable problem. The European-wide GSM operations of Voda are the envy of the continent, and the nationwide CDMA network Airtouch and BAM fusion might offer would be a strong contender -- but these two standards are not compatible. Getting competitive GSM/CDMA handsets to the market is a pipe dream so far -- so Vodafone can't offer international roaming for its customers, and may be stuck with two third generation digital standards, one for the CDMA and the other for the GSM networks. Not much synergy there. Which gets us into the heart of the proposed BT-AT&T deal, which would combine their extensive mobile networks around the world. The companies have invested in TDMA in USA and Canada - and in GSM in European and Asian markets. And here synergy is just around the corner. AT&T has commissioned TDMA/GSM handsets from Nokia and Ericsson and should get the first models before spring. That will enable the company to offer global roaming with a single handset. Rumours in Scandinavia place the weight of the competing TDMA/GSM worldphones around 4-5 ounces and likely retail price below 400 dollars. This would clearly be a satellite-phone killer in the business travel category. The new BT-AT&T proposal of the Advance alliance puts their mobile operator holdings under one roof and seems to signal clear commitment for the worldphone concept. That should come as good news for Ericsson, which probably has the most to lose if its massive commitment in TDMA-GSM hybrid models would not be enthusiastically backed by operators. Nokia's position has been a little hazier, but AT&T has already signalled its intention to use Nokia as a TDMA/GSM handset provider. The big question mark here is Motorola's position -- the company's TDMA/GSM convergence position has been notably muted. Even more important is this Advance alliance position: "Taking a common position on Third Generation mobile and mobile Internet standards, to converge the TDMA and GSM communities around a set of standards for third generation mobile communications services." This concept of converging TDMA and GSM and guiding the standards into a common upgrade path towards third generation technology has been vaguely bandied about for a year or two. But the British Telecom - AT&T alliance actually has the muscle to make it happen. Synergy benefits for these two giants in purchasing common third generation network and handset gear in the future are obvious - especially when compared to the difficulties Vodafone is facing with trying to juggle its GSM and CDMA networks. In the short term, hybrid handsets should hand AT&T a new weapon in its quest for better national footprint and mobile data solutions to counter the early GSM and recent CDMA introductions of data services piped into mobile phones. Much before third generation technology finally arrives, there are intriguing questions. How rapidly will the TDMA operators start purchasing mobile data "boosters" that start moulding these networks towards convergence with GSM? How will the consumers respond to GSM/TDMA handsets next year? Is Ericsson's belief in the GSM/TDMA convergence now starting to pay off -- after being derided as a pipe dream by many industry observers during recent years? Is this development blindsiding Lucent and Nortel, which seem to have neglected the convergence story and even GSM data solutions like GPRS? Can AT&T now hit back at Sprint by attacking its Achilles' heel -- the lack of a coherent international strategy? ®

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