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Cellular Merger Approved

Cingular-AT&T Wireless Union to Require Asset Sales

By Yuki Noguchi
Washington Post Staff Writer
Tuesday, October 26, 2004; Page E05

The Justice Department yesterday approved the $41 billion merger of Cingular Wireless LLC and AT&T Wireless Services Inc., requiring the combined company to sell off some assets in 11 states in order to satisfy antitrust concerns.

The Federal Communications Commission approved the deal late last week and is expected to issue its detailed decision as early as today, removing the final regulatory obstacle to the deal.

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The combination of Cingular and AT&T Wireless will create a giant with more than 47 million customers in 49 states, surpassing Verizon Wireless as the nation's largest cellular provider.

The company will be a major player in all of the nation's 100 largest cellular markets. But to blunt potential anti-competitive effects of the combination on consumers, the Justice Department and Cingular agreed that the combined company would sell some of AT&T Wireless's airwave licenses and customer contracts in certain smaller markets where the companies are dominant.

These include Litchfield, Conn.; Fulton, Ky.; Oklahoma City and Ponca City, Okla.; and Lufkin and Nacogdoches, Tex.

The merged company, which will have about 70,000 employees, also is being required to sell minority interests in wireless companies in Georgia, Kansas, Louisiana, Massachusetts and Missouri. Additionally, it must sell some of its airwave licenses in Michigan, Tennessee and Texas.

The merger agreement was detailed in U.S. District Court in Washington yesterday. The Justice Department filed a complaint citing concerns that the merger as originally proposed could result in higher prices and slower deployment of new services for consumers. It simultaneously filed its settlement agreement with Cingular and AT&T Wireless, listing the conditions for approval to complete the merger.

"Today's action by the department ensures that consumers of mobile wireless services will continue to benefit from competition," R. Hewitt Pate, assistant attorney general in the antitrust division, said in a statement.

The FCC is still reviewing its 100-page order, said spokeswoman Lauren Patrich, and is working to release the document as soon as possible. The five FCC commissioners voted unanimously last week to approve the merger, with the two Democratic commissioners dissenting in part.

"This merger will create a premiere provider that is very well-equipped to meet the most demanding needs of wireless customers today and in the future," said Stanley T. Sigman, president and chief executive of Atlanta-based Cingular, which is jointly owned by SBC Communications Inc. and BellSouth Corp., in a statement.

But consumer groups opposed to the deal criticized the Justice Department settlement, saying it is a bad deal for wireless users who will have fewer choices of wireless carriers and face potentially higher prices in the long run.

"They're allowing Cingular to control so much of the spectrum that it could only sustain two or three major players around the country," said Gene Kimmelman, director of Consumers Union in Washington. "But what's of greater concern is that two of the three biggest wireless firms are virtual monopolies in local telephone companies," and that concentrates too much market power, he said. "This is an enormous retreat from past antitrust policies that promoted competition in the wireless market."

Regulators did not require much of Cingular, some analysts said.

"The divestitures seem quite light-handed," said Rebecca Arbogast, an analyst with Legg Mason Wood Walker Inc. The markets Cingular is selling are small, and regulators are allowing it to control a large share of spectrum, she said, which could be encouraging news to other wireless carriers considering merging.

Cingular outbid British wireless conglomerate Vodafone Group Plc for Redmond, Wash.-based AT&T Wireless in February. When the deal closes, shareholders of AT&T Wireless will receive $15 a share.


© 2004 The Washington Post Company