Cingular snaps up AT&T Wireless

Cingular Wireless has agreed to buy AT&T Wireless Services for around $41bn.

Cingular Wireless has agreed to buy AT&T Wireless Services for around $41bn.

The deal, which still requires regulatory approval from AT&T wireless shareholders and regulatory authorities, would create the largest company in the US wireless market, with 46 million customers. The deal is expected to be finalised by the end of the year.

Vodafone withdrew from the bidding after it concluded that it was no longer in its shareholders' best interests to continue discussions. It said it remained committed to its partnership with Verizon, of which it holds a 45% stake.

"In pursuing AT&T Wireless, we were attempting to see if we could create more shareholder value than we currently have with Verizon," said a Vodafone spokesman.

"This is not a question of price, since a company the size of Vodafone has access to funding. We have laid down a benchmark in terms of price early on. Beyond that benchmark, there was no point in proceeding as no value was created for shareholders."

Representatives from Cingular could not be reached for comment.

Along with creating the largest GSM network in the US, Cingular's acquisition of AT&T Wireless will speed the company's ability to offer advanced wireless data services and upcoming 3G services to customers because of its improved spectrum holdings.

"Vodafone really wanted the GSM footprint that AT&T Wireless would have provided and it won't be happy with the number two position," said IDC senior analyst Paolo Pescatore. "The question is now, what will Verizon do to re-establish its position?"

Ovum chief analyst Julian Hewett expected Cingular to take the lead with consumers in the US wireless market, and Verizon will continue to lead the business market, partly because of its new Code Division Multiple Access Evolution-Data Only (CDMA2000 1x EV-DO) high-speed data services.

"I imagine that Vodafone and Verizon will reassess their relationship now and they may decide they have got to make the best of it," said Hewett, who speculated that the pair might consider developing a virtual 3G service on Verizon's network or attempt to acquire Sprint.

Laura Rohde writes for IDG News Service

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