DENVER, United States-VoiceStream Wireless’ launch of wireless service last month in the U.S. states of California and Nevada not only provided the country’s smallest nationwide operator with a footprint in a pair of lucrative markets, but also was the carrier’s first public launch of its T-Mobile brand name to match parent company Deutsche Telekom’s T-Mobile wireless division.
But with rumors swirling thick and fast about the possible sale or merger of VoiceStream to another wireless operator, the carrier’s customers eventually may find their heads spinning through another name change. Possible suitors for VoiceStream include U.S. operators AT&T Wireless Services and Cingular Wireless and may include international players looking for a foothold in the U.S. market.
While the name change has been expected since the beginning of the year, speculation of a possible sale of VoiceStream by its parent has increased since the man who spearheaded the VoiceStream purchase, Ron Sommer, was forced out of DT and replaced by new leadership with orders to trim the German company’s substantial debt.
Sommer took over at DT in 1995 and oversaw the company’s transition from a state-run monopoly into a global telecommunications powerhouse dwarfed in Europe only by British rival Vodafone Group. The transition included the company’s initial public offering in 1996 and its eventual US$30 billion purchase of VoiceStream last year, which contributed to DT’s current US$66 billion debt load.
Following Sommer’s resignation, DT’s supervisory board named former chairman Helmut Sihler interim chief executive. He has said publicly the company is on the right track, but is reported to be looking for ways to trim DT’s huge debt. One of the most talked about financial cuts has been the sale of VoiceStream.
“This appears to have the most immediate chance of reducing debt,” said Julian Hewett, chief analyst at Ovum.
But even with the threat of a sale by its parent company, VoiceStream is moving ahead with its name change as part of DT’s plans to align all its wireless operations worldwide with its T-Mobile wireless division.
“Everything is going ahead as planned,” said Kim Thompson, spokeswoman for VoiceStream.
The branding change already has begun in California and Nevada, where VoiceStream launched service through its network-sharing agreement with Cingular. Customers in those markets will never have known the VoiceStream name and will simply be offered the service as T-Mobile.
VoiceStream said it expects to transition the rest of its launched markets, which serve more than 7 million customers across the country, to the T-Mobile brand name during the next few months.
Analysts note that while there is a chance VoiceStream eventually may be sold by DT, the fact that it is going ahead with its brand switch indicates a sale is not imminent.
“Until a deal is signed, I think they have to go ahead with their original plans,” said Tole Hart, senior wireless analyst at Gartner.
While many analysts expect VoiceStream to be sold to a larger competitor, some think it may be in DT’s best interest to keep its U.S. wireless holdings and find other ways to trim its debt. With VoiceStream’s current value at around US$10 billion, DT investors may become more disenchanted with the company if its foray into the U.S. market resulted in a US$20 billion loss.
“If I am DT, I’m going to do everything I can to hold onto it,” said Michael Doherty, senior wireless analyst at Ovum. “There was a reason DT entered into the U.S market. The reason is still the same; it’s just the conditions have changed. I think they would have to be in much worse shape to sell VoiceStream.”
DT said last week it was in discussions with five international groups about the possible sale of a handful of cable television divisions. DT had originally planned to sell its cable television interests to U.S.-based Liberty Media for US$5.4 billion before German regulators blocked the bid. GW
