May 25, 2004 7:17 AM PDT

Cingular, T-Mobile sever joint venture

Wireless carriers Cingular Wireless and T-Mobile USA said Tuesday that they will shelve a three-year-old network infrastructure joint venture, based on the former's pending buyout of AT&T Wireless.

The partnership helped Cingular enter the wireless market in New York City and gave T-Mobile a foothold in the California and Nevada regions. Under the agreement to end the enterprise, Cingular will sell the shared California and Nevada network, along with other spectrum in those markets, to T-Mobile for about $2.5 billion.

T-Mobile, a U.S. subsidiary of Germany's Deutsche Telekom, said it will provide network services to Cingular customers until the AT&T Wireless acquisition is complete. And while both carriers pledged that customers will be unaffected by the arrangement, T-Mobile indicated that it will replace its existing roaming agreement with Cingular with a new nationwide agreement under different terms.

Under the agreement, T-Mobile will acquire an additional 10MHz of wireless spectrum covering San Francisco, Sacramento and Las Vegas from Cingular for $180 million. T-Mobile also has the option to acquire an additional 10MHz of spectrum in Los Angeles and San Diego within two years. In return, Cingular will be granted 10MHz of New York spectrum in exchange for certain California infrastructure, as specified in the joint venture pact.

The end of the joint venture marks the beginning of a new era for Cingular, which appears likely to become the No. 1 wireless services provider in the country after it completes its bid to buy out rival AT&T Wireless. Last week, AT&T Wireless shareholders approved the deal. This leaves antitrust reviews of the acquisition, specifically by the Federal Communications Commission and the Department of Justice, as the only significant hurdles left. Cingular expects to close the deal during the first quarter of 2005.

The T-Mobile pact had been significant to Cingular's growth, because it allowed the company to enter New York, one of the nation's largest and most competitive wireless markets, in a cost-effective manner. The two companies described the relationship as an infrastructure "factory" that effectively made wireless coverage available to both carriers in lucrative and fast-growing metropolitan locations.

"Over the last two years, our joint venture with T-Mobile has been good for Cingular, its customers and wireless consumers in general," Stan Sigman, chief executive at Cingular, said in a statement.

If the AT&T Wireless buyout is successful, Cingular, itself a joint venture between SBC Communications and BellSouth, will cover 47 million U.S. subscribers. By comparison, Verizon Wireless, currently the largest U.S. carrier, has 38.8 million customers.

T-Mobile said it expects to build a customer base of more than 16 million wireless subscribers by the end of 2004. The company also raised its estimate for the long-term growth, predicting that it will have 30 million to 35 million customers within 10 years. The firm had previously estimated that it will serve about 25 million consumers by 2009.

 

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