November 29, 2004

Cingular Wireless will sell spectrum and wireless assets in an attempt to comply with FCC divestiture requests related to Cingular's acquisition of AT&T Wireless Services Inc.

The first deal was with Alltel Corp. and calls for Cingular to sell former AWS properties, including licenses, network assets and subscribers in Oklahoma City and Grant, Okla.; Sherman-Denison and Jack, Texas; Owensboro and Fulton, Ky.; Litchfield, Conn.; and Yalobusha, Miss.

Alltel is also acquiring 20 megahertz of spectrum and network assets formerly held by AWS in Wichita, Kan., as well as spectrum in several Georgia counties.

Cingular said it will receive $170 million in cash from the transaction as well as receiving partnership interests in several markets currently joint owned with Alltel, including Wichita; Kansas City, Mo.; Milwaukee; and several markets in Texas. Alltel will gain more ownership in markets it manages in Michigan, Louisiana and Toledo, Ohio.

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Analysts noted the markets cover approximately 3.4 million potential customers and include around 200,000 subscribers.

The FCC noted in its approval of Cingular's acquisition of AWS that the markets being acquired by Alltel were likely to be harmed competitively by Cingular's purchase of AWS. The deal with Alltel involves eight of the 16 markets singled out by the FCC for such concerns.

Cingular also announced a deal to sell 10 megahertz of spectrum in the 1.9 GHz bands covering Dallas and Detroit to MetroPCS Inc. for $230 million in cash. The licenses cover approximately 11 million pops with the deal valued at $2.10 per megahertz pop.

MetroPCS, which has recently been forced to postpone an initial public offering as well as filings with the Securities and Exchange Commission due to questionable accounting practices, said it received a bridge financing commitment from Bear, Stearns & Co. Inc. to help finance the acquisition.

"We are very excited to be able to obtain this spectrum, which will allow us to develop two more of the largest markets in the United States with our unique service," said Roger Linquist, chairman, chief executive officer and president of MetroPCS.

MetroPCS recently acquired a pair of licenses from NextWave Telecom Inc. in Florida for $43.5 million, and said that in addition to its currently launched markets of Atlanta, Miami and San Francisco, it will now offer its flat-rate, unlimited calling service in five of the top 12 markets in the country.

Cingular will retain 70 megahertz of spectrum in Dallas and 65 megahertz in Detroit following completion of the deal. The FCC noted that due to the denser populations in both markets, competition would be affected without divestitures by Cingular following its acquisition of AWS.

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Both deals are expected to close early next year.

Cingular has eight remaining markets it is expected to divest in Arkansas, Mississippi, Missouri and Texas, which analysts said could garner interest from a number of operators including Western Wireless Corp., U.S. Cellular Corp. or Verizon Wireless.

Cingular is also expected to divest spectrum in Knoxville, Tenn., which is expected to generate interest from Sprint PCS, which is currently operating in Knoxville with only 10 megahertz of spectrum.

Source: RCR News

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