Cingular Wireless L.L.C.’s integration of AT&T Wireless Services Inc. gained steam last week as Cingular converted more than 1,000 AWS retail outlets to the Cingular moniker.
The timing of the conversion was important as Cingular had previously stated it wanted to provide a seamless presence of both operations prior to the holiday shopping season, which Stan Sigman, Cingular’s president and chief executive officer, claimed historically represented as much as 40 percent of customer acquisitions for the entire year. The season traditionally kicks off the day after Thanksgiving. Cingular now has more than 2,800 company-owned stores nationwide.
Analysts have forecast that this year’s holiday season is likely to be more competitive than normal as customers have become more aware of wireless local number portability since its launch last November. In particular, industry watchers think that AWS customers who are confused by the acquisition could be up for grabs.
Cingular said more than 14,000 people worked on the physical transition of AWS stores, which included replacing millions of in-store point-of-purchase materials. In addition, the carrier said it provided more than 2.2 million hours of training to a dedicated team of in-store, network, customer service and other employees to support the transition and conducted more than 30,000 end-to-end tests to ensure new account activations and upgrades could be handled seamlessly.
“We want to get the transition done as quickly as possible,” said Cingular spokesman Clay Owen. “This shows that we are making real progress in making this merger work from a customer point of view.”
Cingular said it would begin transitioning approximately 10,500 agent locations during the coming months.
In addition to the consumer-facing transition, analysts have noted that the integration could boost Cingular’s product revenues during the fourth quarter as the carrier is aggressively trying to upgrade AWS customers with new handsets that support enhanced network selection (ENS) and can shift between the 1.9 GHz and 850 MHz spectrum bands when a subscriber travels toward the edge of a cell site.
RBC Capital Markets telecommunications analyst Jonathon Atkin said that to accelerate the shift, Cingular is selling primarily ENS phones to new and upgrade/renewal customers, requiring former AWS customers who change to Cingular plans to obtain an ENS-equipped handset and providing a $75 equipment trade-in credit on a dozen handsets to AWS customers migrating to Cingular rate plans.
Atkin added that if Cingular is successful in increasing its traditional quarterly handset replacement rate from between 6 percent and 7 percent to 10 percent of legacy AWS customers, it would translate to roughly 3 million additional handsets sold next year.
While the customer-facing integration is moving smoothly, analysts don’t expect Cingular to be in any rush to integrate back-office billing systems.
“I just don’t think it’s that important for them at this time,” said Daniel Longfield, telecommunications industry analyst at Frost & Sullivan. “They have so many other issues like maintaining their market share that I think they will let the back-office billing integration slide to the back burner in the short term.”
Longfield said he thought Cingular eventually would migrate AWS’ billing platform from Convergys Corp. to its own Amdocs Ltd. platform following the end of Convergys’ current five-year agreement with AWS.
“There is no sense in making the transition early if Cingular is just going to have to pay Convergys regardless if it’s using their platform or not,” Longfield explained, adding that Convergys generates approximately 30 percent of its revenues from AWS.
Longfield noted that Cingular could focus some additional resources in its back-office wireless data operations, noting the carrier has traditionally lagged its competitors in offering data content. Longfield said he expected Cingular would probably quickly integrate its mobile-content operations with AWS’ services until it can get a better handle on network integration. Both Cingular and AWS use Qpass Inc. for back-office billing of wireless data services.
Cingular’s Owen said he expected the back-office billing systems probably would be a long-range target for the carrier, but that AWS customers should begin seeing the transition on their bills during the next few months.
“AWS customers will begin seeing the Cingular logo on their bill with the full transition completed within six months,” Owen said, noting that Cingular has the use of the AWS name for six months after the acquisition closed following an agreement earlier this year with AT&T Corp.
Cingular is also continuing to meld rate-plan offerings with AWS plans in an attempt to further remove perceived differences for consumers. Cingular recently dropped its 1,000 anytime minutes for $40 per month plan that was offered by both carriers and unified the per-minute rates of their respective offerings. The only remaining significant differences between the carriers’ rate plans are Cingular’s Rollover offer, which is limited to Cingular plans, and AWS’ continued offering of unlimited night calling minutes beginning at 7 p.m. on rate plans higher than $60 per month.
Cingular’s competitors are also applying increased pressure on the integration process.
T-Mobile USA Inc. last week reintroduced its three-day weekend offer, which provides customers with unlimited calls on Friday, Saturday and Sunday as well as 600 anytime calling minutes for $40 per month that was pioneered during the holiday season last year. The offer joins the carrier’s 1,000 anytime minutes and 600 anytime minutes with unlimited night and two-day weekend plans that are also $40 per month.
Analysts have been predicting carriers would stay away from aggressive rate-plan offerings this holiday season, noting most operators instead are relying on increased handset incentives that typically cause a spike in customer acquisition costs, but allow them to maintain smoother customer average revenue per user results that are impacted by less-expensive rate plans.
