The SBC Communications Inc. and Ameritech Corp. merger means two major cellular markets may be up for grabs.
Both companies own cellular licenses in Chicago and St. Louis, Mo., as well as surrounding licenses in Illinois, Indiana and Missouri. SBC will have to sell off one license in each overlapping market before the merger is completed. The Federal Communications Commission does not allow a carrier to own more than 45 megahertz of spectrum in one market.
Many analysts suspect SBC will sell off Ameritech’s overlapping properties, many of which use Code Division Multiple Access technology. SBC’s own cellular markets use Time Division Multiple Access technology. But the merger, if completed, would leave SBC with three separate technologies in its wireless portfolio. Through Pacific Bell Mobile, SBC uses Global System for Mobile communications technology in its personal communications services properties in California and Nevada. Ameritech already has deployed CDMA service in its other large properties. SBC could transition them to TDMA technology.
“This lays the groundwork for a major player to reconsider its technology choice,” said Robert Egan, research director with Garner Group in Stamford, Conn. “To remain competitive, SBC will likely make a significant investment to upgrade its TDMA network to be compatible with third-generation wireless platforms. SBC might then revisit its technology and migrate from IS-136 to CDMA. SBC could start this migration by keeping the Ameritech CDMA properties intact.”
SBC has a clear strategy to move out of its region and likely will do this by making more acquisitions, continued Egan. It would run into more CDMA properties if Sprint Corp., GTE Corp. or Bell Atlantic Corp. become targets. SBC already has tried to hook up with AT&T Corp.
“Migrating to CDMA and divesting its GSM property in the United States could help solve SBC’s wireless technology quagmire in its quest to be a local national carrier and its intent to enter 30 additional markets,” said Egan. The bottom line is to buy into a brand with the ability to roam in corresponding markets, he said.
Ira Brodsky, president of Datacomm Research Co. in St. Louis, believes many carriers are realizing they don’t want to be locked into one technology. “The key issue is how to differentiate yourself from other players,” he said.
BellSouth Corp. operates GSM PCS networks and cellular TDMA networks. United States Cellular Corp. and Vanguard Cellular Inc. have opted to deploy both TDMA and CDMA technology in their markets. U.S. Cellular said it is doing so to extend the footprint of the predominate technology in proximity of its markets. The majority of roaming traffic in its markets comes from surrounding markets.
In addition, the advent of dual-band, dual-mode phones capable of roaming on various air interfaces is on the horizon, making the issue of fragmented technologies obsolete, Brodsky said.
At any rate, a Chicago license would be a highly coveted purchase for many carriers. The Chicago market is the third-largest cellular market in the United States, with about 1.75 million subscribers and a high penetration rate. The St. Louis market is the 19th largest cellular market in the United States.
