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Cingular eyes AT&T Wireless for mobile mega merger

But good for who, exactly?

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Cingular looks set to beat T-Mobile to merge with AT&T Wireless, according to the Wall Street Journal, which reports that the two are in an advanced stage of negotiations. The merged company would become the No.1 mobile phone network in the US, with 45 million subscribers, pushing Verizon out of the top spot.

AT&T, T-Mobile and Cingular all compete using GSM/GPRS networks; Sprint and Verizon operate CDMA.

When the Deutsche Telecom-owned T-Mobile entered the US eighteen months ago, it looked a natural partner to merge with Cingular, the joint venture between the SBC Baby Bells (California, Nevada) and BellSouth. In some regions, such as here in the Bay Area, the two share the same network infrastructure. However talks between AT&TW, which spun off from the Death Star in the summer of 2001, and Deutsche Telecom never gained any momentum. Both T-Mobile and AT&T Wireless have considerable debt burdens.

AT&TW and Cingular already have a joint venture to build out infrastructure on major highways, worth some $50 million according to a Cingular SEC filing.

Some creativity will be required from the accountants. A potential suitor for AT&T would have to meet a $23 billion evaluation, and SBC and Bell South have around $10 billion in ready cash. But would the acquisition benefit long-suffering consumers?

If the savings were passed on to the customers in the form of better plans or better infrastructure (Cingular/T-Mobile's service here is notorious, even by US standards), then obviously, yes. However GSM phone users who have a choice of three providers here, would see their options diminish fairly dramatically. The merged company would also need to devote its energies to internal organizational issues (such as sacking tens of thousands of staff) rather than planning a coherent strategy that encompasses wireline and wireless, as Verizon is doing so impressively.

A clue about who the real losers will be comes from a Reuters wire report, which describes how the merged company will benefit from "consolidating stores" (consolidating being a prudent, even comforting fate for a building) and "slashing staff"; slashing being what Freddy from Friday the Thirteenth does.

That's reassuring. ®

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