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No lame duck, AWS adds twists to rate plans

Showing a thirst for life rivaling the old man in Monty Python’s Holy Grail who repeatedly cries out, “I’m not dead yet,” AT&T Wireless Services Inc. has positioned itself to continue to compete in the wireless industry despite its impending acquisition by rival Cingular Wireless L.L.C., scheduled to be completed by the end of this year, and dour operating predictions by industry analysts.

While AWS’ operations recently have shown signs of stress following a botched back-office upgrade last October and troubles with its local number portability implementation that eventually warranted a Federal Communications Commission inquiry, the carrier has been aggressive in rolling out consumer-friendly rate plan promotions.

“The problems [AWS] has encountered are fixable and appear to have been taken care of,” said Jeff Kagan, independent telecommunications industry analyst. “Now [AWS] just has to focus on retaining its customers.”

As part of that focus, AWS last week launched its GSM America plans, which eliminate roaming charges for customers when they roam on GSM networks from carriers with which AWS has signed agreements. AWS noted the agreements along with its own network expansion, including the installation of GSM equipment using the 850 MHz spectrum bands in some markets, has nearly doubled its national GSM coverage area during the past year to about 1.2 million square miles.

“During the last 12 months, we have added or improved 15,000 cell sites, including those added through roaming agreements in major cities with Cingular Wireless and other GSM carriers,” explained Michael Keith, president of AWS’ mobility operations.

The GSM America promotion-which follows AWS’ recently launched Early Evenings offer, allowing customers to access their unlimited night and weekend calling minutes beginning at 7 p.m., and the introduction of international text messaging-is expected to close the gap with Cingular and T-Mobile USA Inc., which have been offering free nationwide GSM roaming on select plans.

In support of the offering, AWS announced a new advertising campaign touting its strengthened network that will carry the “How many bars do you have?” tag line, referring to the signal-strength indicator on most wireless handsets. Analysts noted the campaign is a move by AWS to reverse recent consumer surveys showing the carrier ranks below average in both network quality and coverage and is an attempt to bolster its network image similar to Verizon Wireless’ successful “Can you hear me now?” campaign.

AWS has also been aggressive in attempts to route customers to lower-cost sales channels including its Web site, where the carrier offers customers additional anytime calling minutes, as well as a revolving door of subsidized handsets. Last week AWS was offering 16 of 37 available handsets, including a number of color-screen models and camera phones, free after rebates for customers who sign up online for service.

The available handsets also include three EDGE-enabled devices that along with a Sony Ericsson PC Card are part of AWS’ nationwide EDGE network, which it claims is the fastest nationwide data network currently available. While some of its competitors have begun to roll out faster technology, analysts note AWS likely will be able to back its “fastest nationwide data network” claim until the eventual sale.

“Having the fastest nationwide data network is a big plus for their business push,” Kagan noted. “That is still the most lucrative market.”

In addition, AWS recently said it was on track to launch higher-speed W-CDMA services, which are expected to cater to its business customers, in four markets by the end of the year through its agreement with NTT DoCoMo Inc.

AWS has also been one of the few wireless carriers to successfully cross-market text-messaging capabilities through its relationship with the “American Idol” TV show, which has resulted in more than 7.5 million messages sent from AWS users. AWS also launched last week what it claims is the first music-recognition service in the United States that allows customers to place their handsets next to a music source for 15 seconds and immediately receive a text message with the song’s name and recording artist.

Analysts predict this leadership position in an increasingly popular segment of the data market should help AWS maintain a presence as a leading data provider and help stabilize average revenue per user.

“This out-in-front forward functionality will enable continued revenue growth over the next year, and wireless data components should help drive ARPU in the coming months as these services continue to grow in popularity,” said Current Analysis’ wireless industry analyst Jeffery Rickard.

Despite its best intentions, many remain unconvinced AWS will continue as a competitive threat through the rest of the year. A number of analysts reduced their customer growth estimates and increased their churn forecasts for the carrier due to expected customer uncertainty about AWS’ future. UBS Warburg said it expects AWS to lose about 422,000 internal subscribers during the first quarter and post 3.5 percent in customer churn, while RBC Capital Markets cited poor wireless retail channel growth during the first three months of the year as part of its forecast that AWS will lose 100,000 subscribers during the first quarter and 400,000 customers for all of 2004.

There is also concern that AWS’ aggressive rate plans and handset subsidies could drag on the carrier’s revenues and force Cingular to make strategic decisions about rate-plan offerings that don’t align with its own if its acquisition of AWS is approved.

While AWS’ attempts to remain a player in the wireless industry are expected to end in a similar fate as the old man in Holy Grail, who eventually dies, analysts note AWS still needs to put up a fight until the very end.

“[AWS] does not want to be seen as a lame duck,” Kagan said. “You never know, the merger could still be called off at the last moment.”

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