Friday, November 7, 2008

AT&T gets (slightly) bigger

AT&T Inc. today agreed to a $944 million purchase of rural cell phone carrier Centennial Communications. The purchase would add 1.1 million subscribers to the 74.9 million already on AT&T Wireless. By comparison, AT&T Wireless added 2 million net new subscribers in its 3rd quarter, half of them iPhone users new to AT&T.

However, as RCR Wireless reported

The deal will not, by itself, help AT&T regain the top spot in the U.S. market. Although the carrier currently holds the position, it will soon to lose it to the combination of Verizon Wireless (70.8 million customers) and Alltel Communications L.L.C. (13 million customers).
And that’s about it for adding a large number of US cellphone customers. According to Wikipedia, there aren’t a lot of compatible (i.e. GSM) carriers left for AT&T to buy. Since a purchase of #4 T-Mobile would not pass antitrust muster (even if it were for sale), the three network owners with more than 1 million subscribers — US Cellular (6.2m), MetroPCS (4.8m) and Cricket/Leap (3.5m) — all use CDMA.

This is AT&T’s second effort to expand its exposure to wireless. Earlier in the week, AT&T spent $275m to buy Wi-Fi hotspot provider Wayport. The timing by AT&T seems curious since the hotspot business is so thoroughly commoditized, even though the recent financial meltdown means the price was lower than it would have been in July.

Given the state of the industry, it seems like a merciful exit for Wayport investors. They earned a 73% gain on money that was invested 4-12 years ago, which is not a smart investment but a great way to get out of a business that’s about to lose what remains of its pricing power (except maybe in controlled locations like airports).

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