AT&T Wireless Services Inc.’s admission that it was looking at strategic alternatives for its operations is expected to have broad implications for the carrier’s direct and indirect dealer agents.
Analysts noted that if AWS were acquired by Cingular Wireless L.L.C., consolidation would take place between the two companies in an attempt to reduce operational expenses, including the realignment of sales channels. That realignment could include closing redundant retail locations and altered commission structures for indirect agents.
UBS Warburg noted in a report that Cingular today has 1,800 retail outlets including approximately 900 kiosks, while AWS has roughly 1,000 retail outlets.
“While company-owned retail stores are a potentially lower-cost distribution channel, they have a large fixed-cost mix vs. commission-based sales,” said UBS Warburg in a research report. “We believe the combined company can eliminate duplicate stores in many markets.”
American Technology Research telecommunications analyst Albert Lin agreed with the need for fewer outlets if a domestic carrier acquires AWS, but noted the carrier’s smaller retail base and footprint in a number of markets not currently served by Cingular would soften the effect.
“AT&T Wireless has been behind the industry curve in setting up direct dealers, which should lessen the impact,” Lin said.
Consolidation also could increase pressure on AWS’ TDMA customers-which Lin said make up approximately 85 percent of its customer base-to switch to its GSM network. That pressure could result in increased traffic for retail outlets in the near term.
Dealers voiced differing concerns over the possible loss of AWS.
“It’s definitely something I have thought about,” said an AWS direct dealer who asked to remain anonymous. “I don’t know how they would decide which stores to keep, but I would guess there would be some losses.”
Indirect agents seemed less concerned over the possible loss of AWS, noting that while they potentially would lose one revenue stream, the other carriers could increase their commission structure in an attempt to remain competitive.
“I think it’s too early to tell, but it could go either way,” an indirect dealer said.
Analysts noted that a Nextel Communications Inc. acquisition of AWS would have a limited impact on the carrier’s dealers, as Nextel has few retail outlets and relies heavily on a business-oriented sales team, while a foreign acquirer could actually result in an increase in retail locations as the new parent company looks to expand AWS’ market presence.
