CINGULAR, VOICESTREAM TO SHARE NETWORKS IN N.Y.C., CAL., NEV.
Cingular Wireless and VoiceStream Wireless signed first- of-its-kind network-sharing agreement Mon. to let former start service in coveted N.Y.C. market in mid-2002. Joint venture agreement, which carriers said didn’t require FCC approval, in turn gives VoiceStream access to spectrum in Cal. and Nev., including top 10 markets of L.A. and San Francisco. Executives of both carriers predicted venture would save “hundreds of millions of dollars” in capital expenditures and operating expenses on network buildout plans. Similar network-sharing agreements have been reached in Europe, most notably 3G pact between British Telecom and Deutsche Telekom (DT), but Cingular-VoiceStream deal marks first of such scope for U.S. Companies didn’t disclose financial terms or provide more details about capital expenditure plans related to GSM network sharing. Both Cingular CEO Stephen Carter and VoiceStream CEO John Stanton stressed in conference call with analysts that transaction didn’t signal that U.S. carriers still didn’t need spectrum relief. “Both companies were looking for a quicker way to enter more markets,” Stanton said. “Spectrum is still scarce in the U.S. and this agreement does not change our view that additional spectrum needs to be allocated.”
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GSM-based wireless carrier VoiceStream, which is part of DT’s T-Mobile International Group, will provide service “quickly” in Nev. and Cal. through 50-50 managed joint venture with Cingular, which is itself wireless joint venture of BellSouth and SBC. DT said that under agreement, VoiceStream and Cingular would “contribute radio equipment and certain switching equipment” in Cal., Nev. and N.Y. They plan to buy network services from still-unnamed venture in those markets, although each carrier independently would provide wireless voice and data services to customers under its own brand name. N.Y. spectrum is particularly important win for Cingular, which had purchased 10 MHz of spectrum in that market from VoiceStream last year. Designated entity Salmon PCS, in which Cingular has noncontrolling stake, had dropped out of bidding for N.Y. licenses earlier this year in C-block re-auction after bidding soared too high. Both Cingular and VoiceStream said they would purchase network services from infrastructure joint venture in those markets, but each partner would retain its own licenses in those areas. Agreement already has received approval by DT, SBC, BellSouth. Deal is expected to be completed by first quarter next year.
While some industry observers had expected Cingular to overlay its TDMA networks with GSM technology on way to full- blown 3G services, Cingular’s Carter didn’t make definitive announcement about carrier’s future technology choice. (Cingular has both TDMA networks and GSM infrastructure in southeastern U.S. and on West Coast.) “We have said before we have left quite a few clues along the way, perhaps today is one more clue,” Carter said of GSM-based venture. Public announcement on carrier’s technology plans is expected “fairly soon,” he said.
VoiceStream’s Stanton said GSM-network sharing arrangement would provide far more cost savings than more common sharing agreements among carriers, which often involve roaming arrangements for each other’s subscribers. Cingular and VoiceStream together have “largest single-band, spectrum position of any of their competitors -- 40 MHz -- in N.Y., L.A. and San Francisco,” he said. While no spectrum is exchanging hands, he said venture “gives us the operating efficiencies of one big spectrum allocation.”
Stanton distinguished agreement with Cingular from similar network-sharing arrangements of some European carriers. In June, DT’s T-Mobile International, and British Telecom signed agreement to cooperate on next-generation mobile infrastructure, including constructing and operating networks in Germany and U.K. for 3G licenses. Stanton said that, compared with Cingular-VoiceStream pact, DT-BT agreement is limited to “prospective” site-sharing arrangement and certain sharing of network construction costs. Carter said venture essentially set up “factory” that allowed it to provide wholesale min. to each partner carrier. Stanton said venture provided access to existing infrastructure “without having to make huge, duplicative costs, without the switching and back-end costs that are present in the European examples.”