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Tuesday, May 18, 2004 3:36:20 PM
BOSTON--(BUSINESS WIRE)--May 18, 2004--Commentary by Michael Doherty, Vice President, Telecoms Practice, Ovum.
"AT&T announced today that it will re-enter the wireless market it left three years ago when it spun off AT&T Wireless. AT&T will resell Sprint CDMA wireless service in the US under a five-year agreement that allows AT&T control over all customer-facing aspects of the offer, such as marketing, pricing, distribution, and customer service. The main driver for this venture, to launch commercially by year-end, is to round out AT&T's bundled offer of local and long distance telecoms services. With the impending return of the AT&T Wireless brand after the acquisition by Cingular is completed, AT&T had been signalling its intention to launch some type of wireless offer. Today's announcement, devoid of details on the offer or MVNO agreement, may be an attempt to stave off the recent bad press from AT&T Wireless' misfortunes and associate the brand with a future.
"AT&T also indicated that this announcement is the beginning of a broader wireless strategy that is likely to include other network partners in other markets. Given AT&T's global focus, this is a must-have, as coveted multi-national clients will inevitably demand access to AT&T 'wireless' service while travelling, and the prospects for CDMA overseas are limited, especially in Europe. Nevertheless, the deal is a good move for both AT&T and Sprint as it feeds both companies' need for growth, although in both cases it will be late 2004 or even early 2005 until the results begin to kick in. Costs associated with the deal, however, will begin to rack up almost immediately. Now the task will be rolling out services as quickly as possible.
"One major barrier to an aggressive rollout will be the AT&T Wireless/Cingular merger. As long as this drags on, AT&T cannot roll out services under its own brand (although the company alluded to a limited pre-merger rollout, but was not clear on how this would be done). Any delay may damage AT&T's ability to leverage its branding and offer converged services.
"By going down the MVNO path, AT&T follows the pattern of UK incumbent fixed operator BT, which shed its wireless business unit (subsequently rebranded as O2) and then entered into an MVNO arrangement with that spun-off operator. The BT example illustrates what a long process becoming an MVNO can be, and how long it will take before AT&T is able to offer a fully-fledged mobile voice and data service, even once it begins offering service later this year. BT has been acting as an MVNO of sorts since mid-2003, but even now it doesn't offer a fully-fledged suite of data services.
Overall take: good news for both AT&T and Sprint, but the positive side won't kick in until 2005, while the costs will impact almost immediately," he concludes.
Contacts:
Ovum
Madeline Neylon, 617-722-4630
mxn@ovum.com
http://home.businesswire.com/portal/site/altavista/index.jsp?ndmViewId=news_view&newsId=20040518...
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