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Qwest to Resell Wireless Phone Service from Sprint PCS

Posted on: Tuesday, 5 August 2003, 06:00 CDT

Aug. 5--Qwest on Monday announced it cinched a long-awaited deal to resell wireless-phone service from Sprint PCS, enabling it to divest its own wireless network.

The deal will provide Qwest with a nationwide wireless product to add to its bundle of consumer services that now includes satellite television in addition to phone service. In recent years, the Denver-based company has struggled to make headway with its own tiny wireless division, which has limited coverage.

Qwest also will resell Sprint PCS' service to business customers outside the 14-state territory where it dominates local phone service. Any wireless service sold by Qwest will carry the Qwest brand.

Customers "get it from Qwest. It's on the Qwest bill, and it's very transparent as to who it is," Qwest chief executive Richard Notebaert said Monday. "Qwest likes it because we don't have to put capital into our network." In turn, Sprint PCS, the third-largest U.S. cellular company, will transfer Qwest's existing 1 million wireless subscribers to its network over the next year and gain Qwest customer referrals from now on.

A resale pact between Qwest and Overland Park, Kan.-based Sprint PCS had been rumored for months. Both use the same cellular technology.

To accommodate the deal, Sprint PCS may need to expand its wireless network in Qwest states such as Montana and in some metropolitan suburbs. Qwest's wireless customers will be offered the chance to trade in their handsets for different models during the transition.

"We have a lot of detailed planning that has to happen," said John Garcia, senior vice president of marketing at Sprint PCS. "We have to make sure that we have the capacity on our network to handle the Qwest customers and our customers." Qwest will retain most of its wireless-unit employees to handle service and billing for customers. However, Qwest will seek to sell its wireless spectrum, towers and switches after it completes the transition with Sprint PCS. One analyst said buyers might be tough to find.

"I think if the market was truly receptive to what Qwest had to offer, they would have had a deal by now," said Scott Ellison, an analyst with market-research firm IDC in New York.

Neither company would discuss financial details of the pact. Qwest will purchase wireless service from Sprint PCS at a wholesale price and resell it at a higher but as-yet-unannounced retail price.

Roughly 4 million of Sprint PCS' 18.8 million subscribers come through wholesale agreements. Yet the company's wholesale rates are largely unknown. "That is one of the most closely guarded secrets in wireless," IDC's Ellison said.

For Qwest, the Sprint PCS deal provides the final product needed to round out its bundle of services for customers. The Baby Bell already offered local phone service, long-distance and Internet access. Last month, Qwest landed deals to begin reselling satellite television service from DirecTV and Littleton-based EchoStar Communications.

As part of the deal, Qwest will offer Sprint PCS' Vision advanced wireless data service. The service allows subscribers with camera phones to snap and transmit photographs, among other functions.

On another subject, Notebaert said the approval of Washington state regulators late Friday of Qwest's plans to sell its QwestDex directory unit "may hasten a little bit" the finalization of that sale.

QWEST SERVICES

Local telephone in 14 states.

Long-distance in all states except Arizona.

Dial-up Internet through Microsoft Network.

High-speed DSL Internet within Qwest's 14 states.

Wireless phone for residential customers in Qwest's 14 states through Sprint PCS and for business customers in any state.

Satellite television through DirecTV in Phoenix and Tucson, Ariz., and Seattle; and through EchoStar Communications Corp. in Colorado and Nebraska.

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(c) 2003, The Denver Post. Distributed by Knight Ridder/Tribune Business News.

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