biz re: ATT....it will be interesting to watch.
WSJ article on AT&T Wireless' plans to "come back."
May 6, 2004
A New Cellphone Service With an Old Name
By SHAWN YOUNG and ALMAR LATOUR
Staff Reporters of THE WALL STREET JOURNAL
In a situation bound to confuse millions of consumers, AT&T Corp. plans to launch its own wireless business -- using the AT&T name -- just as Cingular Wireless closes its $41 billion acquisition of AT&T Wireless Services Inc. this year.
"We'll be back in wireless, probably the next day," AT&T Chairman and Chief Executive David Dorman said recently. AT&T has been largely shut out of the cellphone business since 2001, when it split off AT&T Wireless as a separate company to reduce a crushing debt load.
When Cingular Wireless clinched its blockbuster deal to buy AT&T Wireless in February, many industry and market observers breathed a sigh of relief that one competitor in the crowded cellphone market, where prices have been plunging, would be eliminated.
But AT&T officials are making aggressive plans to ensure it won't play out that way. A provision of AT&T Wireless's spinoff from AT&T will let the long-distance company take over the AT&T Wireless brand name. The Cingular deal, which will unite the nation's second- and third-largest wireless carriers, is expected to close by the end of the year if regulators approve. Cingular is a joint venture of two of AT&T's fiercest Bell rivals, SBC Communications Inc., of San Antonio, and BellSouth Corp., of Atlanta.
By then, AT&T intends to have a contract to resell another wireless company's service. The company already is negotiating with several carriers, and hopes to model its success after Virgin Mobile, a cellphone service controlled by British entrepreneur Richard Branson, and other wireless companies that are expanding quickly by leasing network capacity from others.
Cingular, meanwhile, plans to take advantage of a provision in AT&T's arrangement with AT&T Wireless that will let Cingular make transitional use of the AT&T name for as long as six months, said Clay Owen, a Cingular spokesman. "We are going to use all our resources to highlight that Cingular has acquired AT&T Wireless and we are the combined company," Mr. Owen said.
Marketing experts say AT&T, still the nation's largest long-distance company, stands to benefit from the anticipated consumer confusion. A prime target: The 22 million AT&T Wireless customers who will be told they now are Cingular customers. AT&T will attempt to make aggressive offers to keep them under the AT&T umbrella. And it will get to take advantage of years of advertising and brand awareness for AT&T Wireless -- paid for by its rival -- though to distinguish itself, AT&T might want to tweak the brand, perhaps to something like "AT&T Unwired" or "AT&T Mobile," analysts said.
"Brands work best in confusing environments," says Allen Adamson, managing director in New York at Landor Associates, a branding consultancy. "People use brands as a shortcut when there are too many choices and conflicting claims."
Others are skeptical the plan will work. AT&T Wireless has stumbled recently, leading the industry in customer complaints and damaging its reputation with service snafus that led its customer roster to shrink by 367,000 in the first quarter.
That AT&T is trying so hard to get back into wireless reflects the huge growth of the technology, with 163 million cellphone users nationwide. AT&T also hopes to use wireless to do an end-run around its Bell rivals, who own Cingular.
AT&T plans to package its new discounted Internet-based calling services with cellphone service, eventually using new handsets that can double as cellphones and home phones, people familiar with the situation say. For consumers, the move could slash costs for local and long-distance phone service, while further reducing the need to have a traditional fixed-phone service at home or at the office. Wireless, in combination with new Internet-based phone services that AT&T is rolling out to 100 markets by year end, could provide AT&T with a way of stealing not only wireless customers but also snatching traditional home phone customers from its local-phone rivals.
Currently, the wireless business is dominated by the six companies that own the networks. But companies that resell wireless services from another network are springing up as the popularity of cellphones continues to climb.
Still, reselling wireless services isn't always a sure bet. Resellers compete with the very companies that are selling them use of their service, and they don't have ultimate control of the product or potential network problems. Moreover, any profits are shared with the owner of the network.
Reselling wireless service was a loss-plagued disaster for MCI Inc., then known as WorldCom, in the late 1990s, though that company also plans to give it another try. Qwest Communications International Inc., the Denver Bell company in many Midwestern and Western states, last quarter started reselling service provided by Sprint Corp.'s wireless network, but ran into problems converting its current customers onto the Sprint system. Still, Virgin Mobile is growing so quickly by reselling service from Sprint that it added more customers in the first quarter than Sprint itself did.
Analysts say the success of a wireless reseller ultimately depends on the brand name of a company, its marketing and the customer base that a reseller brings with it. In those areas, AT&T will have a huge head start. It doesn't possess AT&T Wireless' customer list, but it can assume that many of its more than 30 million current long-distance and local-phone customers and many of its corporate clients also are AT&T Wireless customers.
If they aren't, AT&T will have a new chance to win them away from other carriers or recruit them anew by bundling wireless with the local- and long-distance services that help AT&T compete against the Bells. That is likely to lead to even more attractive discounts for customers -- and more bruising battles among rival carriers. In turn, that would make it harder for AT&T to turn a profit on wireless reselling.
The pending sale of AT&T Wireless clearly has energized AT&T's effort to get back into cellular -- a technology it invented. AT&T currently has an agreement to resell AT&T Wireless's service, but it had gotten off to a tepid start with trials in only six cities after 10 months. Within weeks of the Cingular deal, AT&T put marketing executive Kevin Crull in charge of a new drive to get its wireless effort going.
The company says it still is in the early stages of looking for a new reseller partner. Among the most likely candidates, according to analysts and industry insiders, would be T-Mobile USA Inc., Nextel Communications Inc., Sprint and Alltel Corp., which has a strong presence in smaller cities and rural markets.
AT&T is likely to market that service as part of the full package of other services it has been stressing in a branding campaign launched this year, says Charles Golvin, an analyst at Forrester Research. That campaign stresses the range of services the company provides. The focus on wireless as part of a package could help AT&T distinguish itself from companies primarily touting wireless alone, Mr. Golvin says. Still, AT&T isn't likely to turn away anyone who wants to buy its wireless service a la carte. The company will try hard to attract the high-end corporate users that are a stronghold for AT&T Wireless.
Write to Shawn Young at shawn.young@wsj.com and Almar Latour at almar.latour@wsj.com
Copyright © 2004 Dow Jones & Company, Inc. All Rights Reserved.
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