Wireless

Orange and T-Mobile are to merge their British operations to create the U.K.'s largest mobile carrier, their parent companies said Tuesday.

The as-yet-unnamed joint venture will have a combined customer base of about 28.4 million people, or 37 percent of the market, with the deal expected to complete in November. Orange chief executive Tom Alexander will be chief executive of the new company, with T-Mobile UK chief executive Richard Moat as chief operating officer.

The companies said the merger will cost between 400 million and 600 million pounds ($655 million and $983 million). It is expected to deliver savings of around half-a-billion pounds per year by 2014, by removing duplicate base stations and retail outlets, as well as other efficiencies in operational staff and customer support.

Timotheus Höttges, chief financial officer of T-Mobile UK's parent company, Deutsche Telekom, said in a statement: "We will become [the] market leader--our customers will benefit in many ways, for example from the best mobile broadband offer in Britain.

"In the second-biggest market in Europe, which is undoubtedly one of the toughest and most competitive, we are giving T-Mobile UK a clear and strong future."

The deal will include T-Mobile UK's 50 percent holding in its 3G network joint venture with Hutchison. It is not known how or if the deal will affect the status of Virgin Mobile, which runs on T-Mobile's network.

Deutsche Telekom lost 600 million euros ($860 million) in the first half of 2009, down from 1.3 billion euros profit in the same period last year, with its T-Mobile UK division writing off 1.8 billion euros and losing 100,000 customers. The period saw gains in the German company's other European mobile operations.

Orange said its U.K. first half sales were down 2.6 percent from last year, at 2.54 billion euros. Orange's parent company is France Telecom.

The deal will need shareholder approval from both companies and will also have to be cleared by British and European regulators. The U.K. mobile telecommunications market is widely regarded as highly competitive, and no regulatory problems are anticipated.

Rupert Goodwins of ZDNet UK reported from London.

AT&T could end up with the lion's share of the wireless assets that Verizon Wireless must get rid of as part of its acquisition of Alltel, The Wall Street Journal reported Wednesday.

The newspaper cites sources who said that AT&T is among several bidders hoping to get their hands on the Alltel subscribers and network. The private-equity firms Carlyle Group and Kohlberg Kravis & Roberts & Co., supposedly are bidding on the assets together as is Providence Equity Partners on its own. At least one cable provider also has expressed interest, the Journal says.

In order to close its $28.1 billion acquisition of Alltel, Verizon Wireless agreed to sell off assets in 22 states to appease regulators. Included in these assets are 2.1 million wireless subscribers and wireless spectrum and equipment valued at around $3 billion.

AT&T is considered to be in the strongest position to bid on the assets, but consumer advocates and rural phone companies say that allowing AT&T to purchase these assets is bad for consumers.

Verizon Wireless and AT&T are the No. 1 and No. 2 wireless operators in the U.S., respectively. Together, they have over 160 million subscribers and account for nearly 60 percent of all cell phone service in the country. Critics, such as Gigi Sohn of Public Knowledge, told the Journal that Alltel's assets should end up with a smaller wireless player to spur more competition, rather than allowing the second largest operator to gobble up more customers and spectrum.

Rural trade groups believe that AT&T could charge expensive roaming rates to other smaller carriers in these regions, which could affect competitive pricing for consumers.

Even if AT&T ends up as the highest bidder for the assets, the deal still has to be approved by the U.S. Department of Justice. But because the deal will likely be evaluated market by market, AT&T could still end up with a significant amount of the assets if it is bidding for assets where it doesn't have a strong presence already.

Some people, such as Dan Meyer at RCR Wireless, argue that AT&T buying the divested Alltel assets might not be such a bad thing for consumers. Alltel primarily operates in rural markets, where national carriers don't offer service. And some of these consumers might be happy to have another national operator, such as AT&T, he said.

But the biggest benefit for rural consumers is that they could finally be able to get the Apple iPhone. AT&T is the exclusive carrier for the iPhone and many people in rural markets have complained that this exclusivity agreement has prohibited them from having access to the latest and greatest technology. While the real policy issue here centers around exclusivity deals, the fact remains that a big group of people want the iPhone and can't get it because AT&T isn't offered in their market.

So even though allowing AT&T to gobble up more spectrum and assets may hurt smaller wireless operators and could ultimately drive up wireless prices, I'm sure there are plenty of people living in rural areas where AT&T doesn't offer service today who would be more than happy for the chance to have an iPhone.

What do you think?

Verizon Wireless has finally completed its $28.1 billion acquisition of regional wireless carrier Alltel.

Verizon announced its plan to buy Alltel in June for $5.9 billion in equity, and it assumed about $22.2 billion in Alltel's debt. The deal was struck only seven months after Alltel was bought out by TPG Capital, a unit of Goldman Sachs Group, for $27.5 billion.

The deal now makes Verizon the largest wireless carrier in the United States, with more than 83.7 million customers. AT&T, which had held that title, had 74.9 million wireless customers as of September 30.

Most of Verizon's new customers are in the Midwest and South, where Alltel operates.

In order to receive approval from regulators, Verizon Wireless agreed to sell operations in 105 markets where Alltel also operates. As a result, Alltel customers in those areas will not be part of the merger with Verizon Wireless.

Alltel customers who are part of the merger will receive letters informing them that their service will change to Verizon Wireless, the company said in an FAQ on its Web site.

Verizon and Alltel both use the cellular technology CDMA. And both companies have built 3G wireless networks using a technology called EV-DO. But it will take months before the companies can integrate their network operations and billing systems.

This means that during the transition, Verizon customers will not be able to receive service at Alltel stores, and vice versa. Alltel customers are also not yet a part of Verizon's in-calling plans. But once the integration is complete, that will change.

And at least for the time being, Alltel customers will not be offered handsets for which Verizon Wireless is the exclusive carrier, including Research In Motion's BlackBerry Storm.

And it's not yet clear when or if deals such as Alltel's My Circle, which allows for unlimited calling between people in a preselected group, will continue. For now, My Circle will be available to Alltel customers while they are on Alltel's pricing plan. Verizon is considering whether to create a similar plan for new and existing Verizon Wireless customers.

The Federal Communications Commission approved the $28 billion acquisition between Verizon Wireless and Alltel on Tuesday after a four hour delay in which commissioners negotiated terms of the deal.

The meeting was supposed to start at 11 a.m. EST. But didn't actually get under way until nearly 4 p.m. EST.

The delay was attributed to discussions among commissioners and Verizon to hammer out a deal that satisfied concerns over roaming conditions put on the deal.

During the meeting, the two Democratic commissioners on the FCC, Michael Copps and Jonathan Adelstein, expressed concern that combining Verizon and Alltel will limit the number of roaming partners that smaller carriers in rural markets could work with. And as a result, they say this will limit competition and drive up prices for consumers.

As part of a compromise, Verizon agreed to keep its roaming rates the same for the next four years.

Verizon Wireless, which is jointly owned by Verizon Communications and Vodafone, announced its plan to buy regional operator Alltel earlier this year, in a deal that will make it the largest wireless operator in the U.S. The phone company won approval for the deal from the U.S. Department of Justice last week.

The FCC had also been expected to approve the merger. But like the Justice Department, which is requiring Verizon to sell off assets in 22 states, the FCC was also expected to put its own conditions on the merger.

In addition to keeping roaming rates the same, the FCC is also requiring Verizon to divest service in a total of 100 markets. It is also requiring e911 accuracy and Universal Service Fund contributions.

The FCC's original agenda for the November 4 meeting had been packed full. But over the past two days, the FCC has managed to whittle down the agenda, approving three minor issues and tabling one controversial issue. Of the original seven agenda items, only three remain, including an item that deals with opening up "white space" spectrum for unlicensed use.

For more on the FCC meeting, check back later when more updates will be posted.

Verizon Wireless has made it through an important regulatory hurdle in its bid to acquire rural wireless operator Alltel, but the approval didn't come without conditions.

The U.S. Justice Department on Thursday gave the green light on the merger. But it is requiring Verizon to divest assets in 22 states, including service in all of North Dakota and South Dakota; large portions of Colorado, Georgia, Kansas, Montana, South Carolina, Utah and Wyoming; and parts of Alabama, Arizona, California, Idaho, Illinois, Iowa, Minnesota, Nebraska, Nevada, New Mexico, North Carolina, Ohio, and Virginia.

The $28.1 billion deal, which was announced in June, still needs approval from the Federal Communications Commission. The agency is expected to vote on the acquisition at its November 4th meeting.

The bulk of the deal's value comes from Alltel's debt. Verizon plans to pay Alltel about $5.9 billion for equity in the company, but it will also take on about $22.2 billion in debt. Alltel incurred most of this debt when it was taken over in a leveraged buyout last year.

Investors have been concerned that the acquisition has gotten too expensive as debt financing costs have risen. But Verizon's CEO Ivan Seidenberg assured them during the company's quarterly conference call this week that Alltel is still a good purchase and would pay for itself in the long run.

Once the purchase is complete, Verizon will become the largest cell phone operator in the U.S. in terms of subscribers, unseating AT&T, which is currently the largest U.S. wireless operator.

Updated at 4:45 p.m. PDT to clarify that portable receivers are capable of receiving live program signals.

The marriage of satellite radio providers Sirius and XM has finally received the blessing of the Federal Communications Commission on Friday. Now we can all finally get the game we want.

For many prospective customers, a key sticking point was the different selections of sports programming offered exclusively by each provider. A few years back, I wanted to make a present of a Sirius subscription to a friend who spends a lot of time driving around Northern California, especially in places that don't get AM/FM signals. After sampling XM and Sirius' music selections, I knew that she would enjoy the Sirius offerings over the XM offerings. But XM broadcasts more games of the sports she enjoyed--just not all of them. There really wasn't a clear winner. So, to keep from saddling her with the wrong or incomplete service, I opted against the gift. Basically, the lack of a comprehensive offering cost the industry a customer.

I suspect that this was a dilemma faced by many listeners who were in search of more than their local radio stations could offer. But the merger means that listeners will be able to choose from a menu to add programming a la carte. For subscribers, this is a big win in programming. You can also bet that the prospect of replacing existing receivers will irritate early adopters.

Critics, however, will tell you that the merger will result in a monopoly. While the elimination of immediate industry competition will create a de facto monopoly, satellite radio is not the only source of music, talk, or sports broadcasting available to consumers. People are getting their music from many sources today. Besides satellite radio, people are finding their favorite tunes on Internet radio, MP3 players, music-playing cell phones and even traditional terrestrial radio.

To tell the truth, I don't listen to terrestrial radio, or traditional free radio, much anymore, unless there is a game I can't get on television. Indeed, "free radio" offers one of the more exciting and attractive music options in the form of HD radio. Unfortunately, some four years after HD radio hit airwaves, consumers have not embraced the new format, which ultimately suffers in comparison with satellite radio because of its limited range. If I weren't so pleased with Sirius' music programming and the fact that it's offered as part of my Dish subscription, I would probably spring for an HD receiver to plug into my A/V home receiver. But I keep waiting for an affordable A/V receiver to come on the market that has HD radio built in as part of the tuner. When that happens, expect home satellite subscriptions to wane a little.

(Disclosure: I listen to music-only Sirius at home via Dish Network and a complete subscription in my wife's car. The only financial interest I have in either company comes in the form of monthly subscription bills.)

You might think that the satellite industry has the upper hand in broadcasting. But while we're on the topic of things we're waiting for, let's look at some of the things the satellite industry can improve. While Sirius now touts portable units as being capable of receiving live signals, many users complain of spotty or poor reception while on the go. Also, while traffic and weather reports for a few metropolitan areas is great, satellite radio can't provide the same content as local news radio stations, so it would be nice have a portable unit that also gets AM/FM radio stations.

As a prerequisite for FCC approval, the companies agreed to freeze subscription rates for three years. If they try to jack the prices on consumers, expect consumers to change the dial, especially with the wide variety of options that are available to consumers today.

How will this merger affect your listening habits? Write in to TalkBack and let us know.

The Federal Communications Commission on Friday formally approved Sirius Satellite Radio's $3.3 billion buyout of former competitor XM Satellite Radio with conditions.

FCC commissioners voted 3-2 to approve the merger, which will unite the nation's only two satellite radio providers and allow more than 18 million subscribers to receive programming from both services. Executives say that the merger will lead to huge cost savings and the first profits in the industry.

Republican Commissioner Deborah Taylor Tate cast the tie-breaking vote after the companies agreed to a three-year cap on prices, set aside 8 percent of their channel capacity for minority and noncommercial programming, and agreed to pay $19.7 million for past FCC rule violations. The companies also agreed to bring interoperable radios to the market within a year.

FCC Chairman Kevin Martin confirmed the final vote Friday night.

"The merger is in the public interest and will provide consumers with greater flexibility and choices," Martin said in a statement.

The FCC was the final regulatory hurdle the companies needed to clear to move the merger forward. The deal, which was valued at $13 billion in February 2007 when it was announced, was approved by XM and Sirius shareholders last December.

Originally, the agency barred satellite radio companies from combining. Critics said a merger would create a monopoly, but executives argued that satellite radio faces more competition from Internet music services, music playing phones, and online music stores like Apple's iTunes that allow people to play music on iPods.

While the proposed merger sailed through a U.S. Department of Justice review without conditions, key congressional Democrats had urged the FCC to impose limits designed to protect consumers.

Brocade announced it plans to acquire Foundry Networks, in a deal valued at approximately $3 billion.

Under the agreement, Brocade will pay a combination of $18.50 of cash plus 0.0907 shares of Brocade common stock in exchange for each share of Foundry common stock, for a total value of $19.25 per share, the two companies said in a joint press release issued Monday.

Santa Clara, Calif.-based Foundry is a 12-year-old company that does enterprise and service provider switching and routing. Brocade's CEO praised it as "strong and well-respected" in their industry, during a conference call with investors and media Monday.

It appears that Brocade could be turning a page in a year that has thus far been a public relations nightmare for the company. In January, the company's former CEO was handed a long jail sentence for criminal misconduct. And last month the company found out it would be paying $160 million for Brocade Communications to settle a federal securities class action lawsuit tied to the company's stock option backdating practices.

On the conference call, CEO Mike Klayko said the two companies share a vision for the future of next-generation data centers and networks and that there are plenty of synergies between them that Brocade will take advantage of.

Brocade and Foundry's boards of directors have both approved the deal, but the acquisition is still pending the votes of Foundry's shareholders.

They expect the deal to be finalized in the fourth quarter of this year.