Regulators clear Cingular-AT&T Wireless merger

Scott Lanman

Tuesday, Oct. 26, 2004 | 9:16 a.m.

Cingular Wireless LLC won U.S. government approval for its $41 billion purchase of AT&T Wireless Services Inc. on the condition the companies sell airwaves and give up customers in some cities.

The Federal Communications Commission will require Cingular to sell part of the combined company's operations in 22 markets out of 734 nationwide, while the Justice Department on Monday imposed sales in 13 areas, some the same as the FCC, aimed at ensuring the companies don't control too much of the cell-phone business in those areas.

Clearance from the two agencies lets Atlanta-based Cingular create the biggest U.S. mobile-phone operator with 47.6 million customers, surpassing Verizon Wireless. Cingular Chief Executive Stan Sigman now must try to retain customers of both companies while combining operations, said analysts including Viktor Shvets of Deutsche Bank in New York.

"It's going to be quite a difficult period," said Shvets, who has "hold" ratings on Cingular local-phone parents SBC Communications Inc. and BellSouth Corp. and doesn't own their shares. The combined company will be stronger than the two separate carriers, though not until "way, way into 2006 or into 2007," Shvets said.

The FCC's five commissioners voted to approve the purchase, with the two Democratic members dissenting from part of the decision, the agency said in an e-mailed statement. The two commissioners wanted more analysis of the effect of the merger on competition between wireless and local-phone companies.

"Cingular will emerge a stronger competitor with better coverage, improved customer service and a renewed commitment to innovation," Republican FCC Chairman Michael Powell said in a statement.

Democratic Commissioner Michael Copps said he was concerned the acquisition would reduce competition between Cingular and its local-phone parent companies. "The chance that wireless will compete effectively with wireline incumbents is diminished," Copps said in a statement.

Under the Justice Department agreement and FCC order, the combined company must sell capacity for sending calls in Dallas and Detroit. In each area, the enlarged company will be required to sell 10 megahertz of airwaves, which equals about 5 percent of the total available in each market. The Justice Department required a third sale in Knoxville, Tennessee.

In 16 other markets for the FCC and 10 for the Justice Department, where Cingular and AT&T Wireless have high market shares, the combined company will be required to sell AT&T Wireless airwaves and customers or stakes in local providers. Those areas include Oklahoma City and Ponca City, Okla.; Litchfield, Conn.; and Fulton, Ky.

Cingular will sell spectrum in 43 mostly rural counties in Georgia, Tennessee and Texas where it holds more than 40 percent of available airwaves and won't bid for airwave capacity in a January auction for cities where the company holds at least 35 percent of frequencies, according to the FCC.

"We hope to complete the deal very shortly and start with the work of bringing these two companies together," Cingular spokesman Clay Owen said in an interview. "We've worked hard with the FCC to come up with a fair order."