ATLANTA-Cingular Wireless L.L.C. and T-Mobile USA Inc. reported plans to end their network-sharing arrangement, which currently provides Cingular access to T-Mobile USA’s network in New York City in exchange for T-Mobile USA gaining access to Cingular’s network in California and Nevada, pending the acquisition of AT&T Wireless Services Inc. by Cingular scheduled to close early next year.
As part of the agreement, T-Mobile USA said it would acquire 100 percent ownership of the shared network in California and Nevada for $2.5 billion, which would be offset by a $200 million fee for unwinding the venture resulting in a total payment of approximately $2.3 billion to Cingular. After gaining control of the GSM network, T-Mobile USA will provide wholesale network services to Cingular until the carrier is able to transfer its customers to AWS’ network following the acquisition.
T-Mobile USA noted the wholesale agreement would guarantee the carrier $1.2 billion in revenue during the next four years based on network usage.
The deal also calls for T-Mobile USA to transfer10 megahertz of spectrum in New York to Cingular as specified in the termination provisions of the joint venture agreement; acquire an additional 10 megahertz of spectrum from Cingular covering the San Francisco, Las Vegas and Sacramento, Calif., markets for $180 million; and receive an option to acquire an additional 10 megahertz of spectrum in Los Angeles and San Diego during the next two years.
T-Mobile USA will also replace its existing roaming agreement with Cingular with a new nationwide agreement with improved terms.
The deal will dissolve the joint venture that was established in 2001 and quells concerns regarding T-Mobile USA’s West Coast presence following Cingular’s pending $41 billion acquisition of AWS earlier this year, which analysts noted would provide Cingular with a New York presence and leave little need for the T-Mobile USA joint venture that was established in 2001. T-Mobile USA noted it currently serves approximately 1.7 million customers in California and Nevada, and 20 percent of its new customers will come from those markets.
“With this agreement, our customers can be confident they will continue to enjoy the reliable, high-quality service currently provided by our world-class network in California and Nevada without interruption,” said Robert Dotson, chief executive officer and president of T-Mobile USA. “Also, the nationwide reciprocal roaming agreement ensures that our customers will have access to the nationwide networks of T-Mobile USA and Cingular, providing them with the greatest possible coverage.”
Analysts noted the deal worked out well for both carriers, as Cingular garnered additional funds needed to complete the AWS acquisition for spectrum and markets it will be able to use from the AWS deal, while T-Mobile USA saved itself from having to acquire spectrum in California and Nevada and build out a network to continue to serve an ever-increasing portion of its customer base.
