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February 15, 2004

Deadline closes for AT&T Wireless bids

The bidding war for AT&T Wireless Services Inc appeared to have become a two-horse race as the Friday deadline for takeover bids passed last week.

By CBR Staff Writer

Yet at the time of writing only two companies were thought to have a realistic chance. Cingular Wireless LLC (owned by SBC Communications Inc and BellSouth Corp) is favorite.

Its all-cash bid is expected to value AT&T Wireless at just over $30bn, although late Friday reports suggested it had upped that figure. Cingular is also expected to make significant cost savings from the deal that Vodafone would not be able to emulate.

The other bidder is Vodafone, which is expected to make a cash and shares offer of almost $35bn.

The board of NTT DoCoMo, the Japanese mobile operator that has a 16% stake in AT&T Wireless, met on Thursday to decide whether to table an offer, but was expected to bow out, hoping instead for a good return on its original investment.

T-Mobile has ruled itself out of making a bid, while Nextel, the fifth largest operator in the US, was thought to considering an offer that would make use of its highly valued shares rather than cash.

The acquisition of AT&T Wireless promises to shake up the overcrowded US market, which is struggling to cope with the aggressive sales campaigns of the six wireless operators. Depending on who eventually gains control of AT&T Wireless, the number of operators could drop to five if Cingular merges its own network with that of AT&T Wireless.

If Vodafone triumphs, however, there will still be six operators in the US, and judging by AT&T Wireless’s last quarter results, the Newbury, UK-based operator would have its work cut out to bring it up to scratch.

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This is a vitally strategic decision for Vodafone because it needs to resolve its position in the world’s most valuable wireless market. To this end, it will have to sell its 45% stake in Verizon Wireless.

The purchase of AT&T Wireless would allow it to introduce its brand name into the US, and allow it to consolidate its global position.

Meanwhile, some of the gloss was taken off the prize of the auction process, after damaging financial results from AT&T Wireless were somehow leaked, casting doubt over the valuation of the business.

The results for January were leaked to Reuters, and showed that AT&T had lost 4% of its customers in January, and the average revenue it made from each of them fell 10% compared with a year earlier.

To add insult to injury, a class action lawsuit was filed in Los Angeles Superior Court by the law offices of Roger R Ellis against AT&T Wireless, on behalf of all allegedly defrauded AT&T Wireless customers in California.

The class action alleges numerous offenses that AT&T Wireless used false and deceptive advertising to attract customers with one plan and then intentionally switched customers to other more expensive and intentionally confusing plans without their knowledge or consent. It also says AT&T Wireless double-billed customers when family shared lines should not have been billed at all.

AT&T Wireless will reach a decision on the bids by February 29.

This article is based on material originally published by ComputerWire

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