Ask the Expert section.
What's happening: On Feb. 17, Cingular Wireless announced plans to acquire AT&T Wireless for $41 billion, plus $6 billion in debt. It's the first merger in a wave of consolidation that should benefit enterprise customers -- just not right away.
Our take: AT&T Wireless and Cingular Wireless both have high customer turnover and are renowned for poor customer service and spotty coverage, so it's tough to see how combining two negatives creates a positive. However, there are a few winners. One is Wall Street, which loves the cost synergies that mega mergers bring (at least in theory). The others are Sprint PCS and Verizon Wireless, who will attack this new behemoth as Cingular/AT&T Wireless spend at least the next year focusing inwardly, consolidating its operations.
Action: CIOs and IT managers are advised to keep an eye on the AT&T-Cingular merger, but they should avoid making changes based on it, even if they're in the midst of contract (re)negotiations.
Summary: In 2003, Cingular Wireless' quarterly churn averaged 2.675%. Put differently, they lost nearly one-third of their customers during the course of the year. Meanwhile, AT&T Wireless' quarterly churn averaged 2.625%. Those figures are by-products of poor customer service, spotty coverage and a difficult transition from one network technology to another. Combining the two companies doesn't wipe away their individual problems. If anything, the complexity of integrating two major companies will only exacerbate them -- and that's assuming that regulators will even approve the merger.
On the positive side, the combination means additional spectrum and network capacity to devote to an aggressive rollout of UMTS data services. Armed with UMTS, Cingular/AT&T can compete directly with Verizon Wireless' 1xEV-DO service and the expected Sprint PCS 1xEV-DV service.
CIOs and IT managers are well advised to avoid being caught up in the hype surrounding this merger. The only safe assumption is that this merger and those that follow will create more competition and pricing pressure for all wireless carriers. That gives enterprises more leverage when negotiating contracts. But for now, CIOs and IT managers should take a wait-and-see position until the dust settles.
This was first published in February 2004