June 25, 2005

Cingular Considering iTunes Phone

NEW YORK -- Cingular Wireless, the No. 1 U.S. mobile service, is considering selling a Motorola Inc. cell phone that can play music using Apple Computer Inc.'s iTunes music service, sources familiar with the matter said on Friday.

"Motorola and Apple have been talking to Cingular about it using the iTunes phone," according to one of the sources, who asked not to be named.

RBC Capital analyst Mark Sue said in a recent research note that Apple and Cingular were working out final details on revenue sharing.

Cingular spokeswoman Jennifer Bowcock and Apple representative Natalie Kerris declined comment.

Apple and Motorola said last summer they were working on bringing the popular iTunes service to mobile phones but Motorola has delayed unveiling its iTunes device so far amid analyst speculation about a lack of interest from operators.

Music and wireless companies are betting that mobile phones equipped with digital music players will be a key source of growth in the next few years. Music providers see phones as a new distribution channel and phone makers believe that music player features will boost cellphone sales.

But network operators have questioned whether such devices, which could require steep subsidies, will boost their revenue as consumers could transfer songs to their phone via their computer rather than the network, according to analysts.

Cingular, the wireless venture of SBC Communications Inc. and BellSouth Corp., however, could be one of the first wireless carriers to sell an iTunes phone.

Motorola spokeswoman Jennifer Weyrauch said the company is on schedule to ship an iTunes phone in the third quarter but would not disclose which operators would sell the phone.

Motorola said in March that it delayed showing its iTunes phone at trade shows earlier this year due to Apple and Motorola's differing approaches to product launches rather than any lack of interest from carriers.

Several analysts have suggested that Cingular would be a logical partner for the iTunes phone as it was the first operator to sell Motorola's flagship RAZR cellphone, which has helped boost sales at both companies.

Most U.S. operators have expressed interest in expanding the music services they deliver to mobile phones beyond the musical ringtones that have proven so popular.

Nancy Beaton, head of music and personalization at Sprint Corp., the No. 3 U.S. mobile service, said recently that music download service would be an "incredible" opportunity, but she would not comment on Sprint's plans. Sprint does not use phones from Motorola.

Verizon Wireless, a venture of Verizon and Vodafone, has said it plans to launch a music download service that competes with Apple's iTunes.

European operators are also interested in selling music downloads to mobile phones, and some have already started at a modest scale with proprietary systems.


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