AT&T answers Cingular call for cell merger: Yes

By James S. Granelli
Los Angeles Times

The Cingular-AT&T merger would be called Cingular, and headquarters would remain in Atlanta, Ga., shown above. Bloomberg News Service

Cingular's acquisition of AT&T Wireless would reduce to five the number of major players in the cutthroat industry, a consolidation analysts said could lead to more stable profits, possibly at the expense of customers.

The two regional Bell companies that own Cingular — SBC Communications Inc. and BellSouth Corp. — would have nearly 30 percent of the nation's cell phone customers, overtaking longtime market leader Verizon Wireless.

If AT&T Wireless shareholders and federal regulators approve the deal, it "will mean better coverage, improved reliability, enhanced call quality and a wide array of new and innovative services for consumers," said Cingular Chief Executive Stan Sigman.

Added AT&T Wireless Chairman John D. Zeglis: "After today, nothing is going to be quite the same in the wireless industry."

Investors hope so.

The union should spark long-awaited consolidation in the low-margin wireless industry, something urged by Wall Street and dreaded by consumer groups.

Cingular and AT&T Wireless use the same technology. Their networks and coverage complement each other more than they overlap.

Consumers Union called the deal a "lose-lose proposition for consumers."

"A move toward greater consolidation cuts at the heart of this growing competition in the telephone marketplace," said Chris Murray, legislative counsel for Consumers Union, which publishes Consumer Reports magazine.

Under terms of the deal, Cingular will pay $15 a share, a 27 percent premium over AT&T Wireless' Friday closing price of $11.82 on the New York Stock Exchange. Shares rose $1.96 to $13.78 yesterday. SBC shares fell 18 cents to $24.87 and BellSouth shares dropped 49 cents to $29.06 on the NYSE.