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Planned Cingular, AT&T Wireless Merger Should Improve Customer Service

Posted on: Wednesday, 18 February 2004, 06:00 CST

Feb. 18--Wireless phone customers should see some slowdown in competitive pricing and services as the number of the national carriers shrinks to five from six with the planned merger of Cingular Wireless and AT&T Wireless Services, industry analysts said Tuesday.

But the remaining national players would continue to woo customers by cutting prices, just not as sharply, and offering key perks, such as deep discounts on phones, the industry observers said.

Cingular and AT&T customers also should expect improved service with completion of the $41 billion merger, which would create the nation's largest cell-phone company.

"This will strengthen every weak link in both companies," said Jeff Kagan, an Atlanta-based telecommunications analyst.

Cingular customers would be able to get AT&T's high-speed Internet service, while AT&T customers can take advantage of Cingular's calling plans that roll over unused minutes to future months, he said.

In addition, customers should encounter fewer dropped calls and fading signals because the combined company will have extra towers, Kagan said.

Atlanta-based Cingular outbid British communications power Vodafone Group after a weekend of fierce bidding. Cingular agreed Tuesday to pay $15 cash per share. Cingular also would assume $6 billion of debt owed by Redmond, Wash.-based AT&T Wireless.

The deal -- subject to approval by AT&T Wireless shareholders and federal regulators -- would create a cellular giant with 46 million subscribers and nearly 70,000 employees. Some analysts expect significant layoffs because of duplication.

The new company would take the Cingular name and be based in Atlanta. Cingular chief executive Stan Sigman would run the merged company. AT&T Wireless chief executive John Zeglis told reporters during a conference call that he would not remain with the combined company once a deal is approved.

While the companies go through the merger, expected to be completed by year's end, customers will continue to deal with their current carrier.

Cingular ranks second and AT&T third in national market share behind Verizon Wireless. Cingular, however, tends to dominate in markets with BellSouth Corp. local phone service, such as Charlotte, Kagan said. BellSouth co-owns Cingular with SBC Communications Inc.

No Carolinas subscriber figures were available. Cingular has 700 stores in the Carolinas. AT&T has 13.

The five remaining national companies after the merger -- Verizon, Cingular, Sprint PCS, Nextel Communications and T-Mobile USA -- will need to keep monthly bills in check and continue offering new services and phones to hold on to customers, analysts said.

Still, carriers might not be so generous in coming years.

Prices have dropped about 25 percent each of the past three years, but could shrink to the teens over the next few years, said Roger Entner, an analyst for The Yankee Group of Boston.

Plans with loads of monthly minutes or free weekends might be available only for customers who buy other services from companies, such as Internet access or land-line phone service, Kagan said.

Wireless companies might seriously back off price cuts if the number of national carriers drops to four. The next targets are T-Mobile and Nextel, the smallest national players, said Michael King, an analyst of Connecticut-based Gartner Inc.

A plus for consumers is that carriers are expected to continue to offer steep discounts on phones. Phone deals are a main mechanism to attract customers who now can keep their numbers when changing cell companies.

A third of wireless customers got their phones for free, while 80 percent paid less than $100 for phones that can cost up to $400, Entner said. The average discount is more than $100, he said.

Cingular and AT&T wireless customers shouldn't see drastic changes, analysts said.

Cingular can't afford to drop its rollover minutes program if the carrier wants to keep Verizon at bay, said Avi Greengart, a wireless analyst for Jupiter Research. Rollover is the top pricing option customers want, outpacing earlier start times for night and weekend calls and bigger buckets of minutes, Greengart said.

The merger could help AT&T Wireless, which has earned a reputation of late for poor customer service. AT&T was the subject of most complaints to the FCC during the first two months of number portability. Cingular ranked fourth.

AT&T had the FCC's highest consumer-complaint rate of any wireless company during the third quarter last year, according to an analysis by The Wall Street Journal. Cingular had the fourth-highest rate among the big six carriers. Verizon had the fewest complaints.

Cingular customer Jeanne Konitzer of Shelby said she's concerned bigger will not be better after going through several recent coverage and customer-service problems.

"We're in the palm of the their hands," she said. "And they're going to want more from us."

AT&T customer William Taft, a retired Charlotte frozen foods business owner, said he's had coverage problems with his carrier as well, but he's looking forward to taking advantage of the minutes rollover plan. "I'll give Cingular a chance."

AT&T Wireless has struggled recently and put itself on the auction block. Late last year, it couldn't add new subscribers because of a glitch in a new software system designed to improve customer service. The company also has acknowledged that it lost more customers than it gained under new federal rules that took effect in late November allowing cell phone users to change carriers without losing their phone numbers.

AT&T Wireless shares climbed $1.96, or 16.5 percent, to close at $13.78 on Tuesday, while SBC fell 18 cents to $24.87 and BellSouth slipped 49 cents to $29.06.

The Associated Press contributed to this report.

CINGULAR WIRELESS LLC

Headquarters: Atlanta

CEO: Stan Sigman

2003 revenue: $15.4 billion

Number of subscribers: 24 million

Number of employees: 39,000

AT&T WIRELESS SERVICES INC.

Headquarters: Redmond, Wash.

CEO: John Zeglis

2003 revenue: $16.6 billion

Number of subscribers: 22 million

Number of employees: 31,000*

*AT&T Wireless previously announced plans to cut 1,900 jobs by 2005.

SOURCES: Company officials, AP archives

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(c) 2004, The Charlotte Observer, N.C. Distributed by Knight Ridder/Tribune Business News.

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