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Cingular Sensation

3/10/2006 7:03 PM Eastern

The fact that AT&T Inc.’s proposed acquisition of BellSouth Corp. would bring Cingular Wireless under a singular ownership could literally give it a stronger voice to compete with cable operators for telephone customers.

While many are focusing on the potential expansion of AT&T’s U-verse video product into BellSouth territory, the unified Cingular ownership might have the greater impact, according to Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc..

Cingular is a joint venture between AT&T and BellSouth that operates as an independent subsidiary, with ownership split 60% and 40%, respectively.

DIRECT CONTACT

Uniting the cellular carrier’s ownership under AT&T will give it a more direct tie-in than in the past, Leichtman said.

“This gives [them] the bundle — not the bundle everybody is talking about, but the telco bundle — and the better bundle for them,” he said. “This now gives them a cleaner road into that phone bundle. And if I were to prioritize and I were them, I would prioritize wireless into the bundle way before I prioritize video.”

That said, Leichtman doesn’t think the unified Cingular ownership will prompt the joint partnership formed between Sprint Nextel Inc. and cable operators Comcast Corp., Time Warner Cable, Cox Communications Inc. and Advance/Newhouse Communications to accelerate their plans to roll out a wireless-service package by the end of this year.

Given that the AT&T-BellSouth merger will take a year to consummate, “I think that timeline still makes sense,” Leichtman said. “I think the message should be the timeline shouldn’t slip til the second half of next year, but it probably doesn’t speed the timeline to tomorrow, either.”

TOO MANY CHOICES

Nor is it a slam dunk that the wireless-wireline bundle is a sure-fire consumer hit. Verizon Communications Inc. tried a wireline-wireless voice bundle in 2002 but found it didn’t lift sales and discontinued it in 2005, Verizon retail products spokesman Jim Smith said. There has been discussion about reforming a more appealing wireless-wireline bundle, he added.

The weak bundle performance has to do with choice in the marketplace, according to Roger Entner, vice president of wireless telecoms research at Ovum Research. Consumers generally choose between only two providers for landline voice, video and high-speed data.

The wireless market is far more diverse, with four nationwide carriers, a growing phalanx of mobile virtual network operators such as Mobile ESPN and some regional carriers, as well. “And the more choice, the more differentiation there is, and the more change in the industry, the less likely you are to bundle,” Entner said.

September