Home

By Justin Hyde

WASHINGTON, April 5 (Reuters) - Less than two months after the sale of AT&T Wireless to Cingular was announced, AT&T Corp. (nyse: T - news - people) is already looking for a partner to help it get back into the wireless business.

The largest U.S. long-distance company has recently said it will quickly re-establish its brand in the growing market for wireless phones once the Cingular deal is complete, by reselling the service of another wireless company, as Virgin Mobile does with Sprint Corp. (nyse: FON - news - people).

The question being raised in the industry is whether AT&T will look to a rival such as Sprint, which could offer the widest coverage and a variety of services, or avoid a direct competitor in favor of a smaller player, such as Nextel Communications Inc. (nasdaq: NXTL - news - people).

AT&T, which was dropped from the Dow Jones Industrials Index last week, spun off AT&T Wireless in 2000 to cut its $65 billion debt after a failed attempt in the late 1990s to form a one-stop shop for telephone, data, wireless, and entertainment services.

But with wireless subscribers poised to grow beyond 160 million this year, surpassing the number of land-line users for the first time, large telecom companies see wireless services as an essential part of their business.

AT&T Chairman and Chief Executive David Dorman made it clear at a Gartner Group conference last week that regardless of which company it chooses as a partner, AT&T will not waste any time out of the wireless game.

"Upon closing approval of the Cingular acquisition of AT&T Wireless we'll get the brand back, and we'll be back in wireless probably the next day," Dorman said.

The Cingular deal not expected to close for several months.

"There are 22 million people using AT&T Wireless today. What's your bet on how many of those are brand loyal to AT&T?" Dorman said.

TO COMPETE OR NOT TO COMPETE

Among wireless companies, Sprint has been the most aggressive about jumping into the wholesale business, with Virgin Mobile and Qwest (nyse: Q - news - people) as its major resale customers so far.

Analyst Jeffrey Kagan said that given Sprint's moves as a wholesaler, its nationwide network and the variety of services it could offer, it was the most likely partner for AT&T.

"This industry is splitting into a wholesale and retail business," Kagan said. "At the same time, you're an archrival with a company, that company is a supplier or customer with you on another initiative."

But others say AT&T will be loath to offer any support to a direct competitor, especially when both companies would likely target the same customers with bundles of local, long-distance and wireless phone service.

That leaves Nextel and Deutsche Telekom's <DTEGn.DE> T-Mobile as the two alternatives. Standard & Poor's equity analyst Kenneth Leon says AT&T is more likely to choose Nextel because the two have a similar focus on business customers, a market Dorman highlighted in his talk.

"Nextel has a brand that is well suited for high-end users and business customers, which might fit into AT&T well," Leon said.

Nextel did not immediately respond to a call for comment.

Jane Zweig, chief executive of The Shosteck Group, a Washington-based wireless consulting firm, said AT&T was one of several companies mulling ways to jump-start a wireless business by reselling services, which could create confusion among consumers.

"In the public's mind, it may look as though there's consolidation" in the wireless industry, Zweig said. "The reality is there's going to be a proliferation of brands."

More News:

4-05-04 Job gains raise expectations of rate increase

4-05-04 Are my electronics and computers deductible?

4-05-04 Bank of America to Cut 12,500 Jobs

4-05-04 Commerce Secretary calls economy strong

4-05-04 Economy, earnings hopes nudge European stocks up

4-05-04 Fed OKs Manulife-Hancock Merger Proposal

4-05-04 HUD Takes Mortgage Simplification Plan Back to Drawing Board

4-05-04 Services Index Hits Record High in March

4-05-04 Spike in Past-Due Credit Card Accounts Reflective of Nation's Debt

4-05-04 Stocks End at Month-Long Highs

4-05-04 Struggling workers hoping to bail when economy improves

4-05-04 Treasuries Hit by Services, Jobs Data

4-05-04 U.S. mortgage bonds stumble near three-month low

4-05-04 Vast US services hits record speed in March

Financial News