With its pending acquisition of AT&T Wireless Services Inc. making its way through various governmental regulators and a final approval not yet certain, Cingular Wireless L.L.C. continued signing deals last week with AWS affiliates that will clear the way for Cingular to continue to operate in markets that AWS was barred from due to non-compete clauses in its affiliate agreements.
The latest agreement was signed with Cincinnati Bell Inc., which operates a wireless network in the Cincinnati and Dayton, Ohio, areas and is currently tied to AWS through roaming agreements and a 19.9-percent equity stake in Cincinnati Bell Wireless held by AWS. Cingular said the deal, which would become effective upon Cingular closing its pending $41 billion purchase of AWS, resolves issues affecting its operations in southwestern Ohio, northern Kentucky and southern Indiana, and will allow Cingular to continue to offer its services in those areas despite its eventual minority interest in Cincinnati Bell.
Cingular’s pact with Cincinnati Bell follows a similar agreement made last month with Triton PCS Holdings Inc. That deal included spectrum and market swaps in the Southeast and Puerto Rico that will free Cingular of the non-compete clause AWS has with Triton PCS as well as get rid of Triton’s AWS affiliate status.
“These deals were needed so we could hit the ground running post-merger,” said Cingular spokesman Tony Carter. “Getting these deals done was paramount.”
The deal with Cincinnati Bell also allows Cingular to force Cincinnati Bell to acquire AWS’ 19.9-percent stake in the wireless venture or gives Cincinnati Bell the right to acquire the minority interest for $83 million after Sept. 30, 2005. In addition, the deal provides Cincinnati Bell with a five-year agreement to receive reduced roaming rates on Cingular’s GSM and TDMA networks. That provision will allow the carrier to continue to offer nationwide services and offset the potential loss of roaming revenues to its recurring operating income. Cincinnati Bell noted that it reported $3 million in roaming revenues during the second quarter of 2004 and $8 million in roaming expenses.
“We are very pleased with the results of these discussions,” said Jack Cassidy, Cincinnati Bell president and chief executive officer. “This agreement ensures that we will continue to offer outstanding nationwide wireless service at attractive prices for our customers in Cincinnati and Dayton.”
Cassidy also noted that the company’s right to purchase the remaining interest in the wireless venture, which was included in a recently completed amendment to its credit facility, would provide further control over its ability to offer bundled service offerings.
Unlike Cingular’s deal with Triton PCS, which many analysts argued could turn out to be a bad deal for the regional carrier, the agreement with Cincinnati Bell is likely to have minimal impact for both companies. Cincinnati Bell is a large wireline player in the affected markets and still will have the ability to offer bundled services to entice customers. However, Triton PCS soon will have to compete not only against a strengthened Cingular, but also Cingular’s ability to offer bundled services through parent company BellSouth Corp., which is a major wireline provider in Triton PCS’ markets.
Analysts also noted Triton PCS gave up markets and customers that it had spent considerable time and money to acquire in exchange for new markets where it will have to establish a presence.
With arrangements in place with Triton PCS and Cincinnati Bell, Cingular has cleared up possible affiliate hurdles with two of AWS’ largest affiliates, which could have stymied its integration and marketing position following its pending acquisition. Cingular is not completely out of the woods, however. AWS still holds minority interests in Canadian wireless provider Rogers Wireless Communications Inc., as well as regional U.S. carrier Edge Wireless L.L.C., which may need to be addressed before the acquisition is approved.
AWS had stated plans to “monetize” its 34-percent interest in Rogers Wireless following the announcement of its pending acquisition by Cingular, but has yet to announce a final decision. AWS also passed a deadline last month to dispose of its shares in Rogers Wireless to a third party, giving Rogers Wireless the right of first refusal for any potential sale. AWS had previously rejected a $1.1 billion offer by Rogers Wireless parent company Rogers Communications Inc. for AWS’ stake in the wireless venture, though many analysts expect Rogers Communications will eventually acquire the AWS stake.
Edge Wireless, which was formed in 1999 and offers service in Oregon, California, Idaho and Wyoming, said its agreement with AWS would carry over if AWS is acquired by Cingular, and it did not expect any changes to its operations post-merger as its day-to-day operations are autonomous of AWS’ influence.
