FRANKFURT, Germany-Despite recent claims by company management that it expected its T-Mobile USA Inc. wireless subsidiary would benefit from industry consolidation, Deutsche Telekom AG noted in its 2003 annual report that its U.S. wireless subsidiary could be harmed by consolidation in the market if it does not participate.
“In the case of consolidation among the national mobile-phone carriers without T-Mobile USA’s participation-such as announced between Cingular [Wireless L.L.C.] and AT&T Wireless [Services Inc.] in February 2004-there could be competitive disadvantages with a negative impact on growth and profitability,” DT’s report noted.
Analysts have noted that if Cingular’s acquisition of AWS is completed later this year, T-Mobile USA could be left vulnerable as it relies on Cingular’s network in California and Nevada in exchange for Cingular using T-Mobile USA’s network in New York, which Cingular would no longer need due to AWS’ New York network. Analysts have suggested T-Mobile USA’s strong customer growth over the past 18 months is due to its entrance into the California and Nevada markets and would need to either sign roaming agreements or build out its own network to continue to support its customer base.
Cingular was reportedly in talks with DT about an acquisition of T-Mobile USA prior to Cingular’s eventual purchase of AWS, but was turned down as T-Mobile USA has proven to be one of DT’s strongest growing subsidiaries.
