As the nation’s largest wireless carriers consolidate, large questions remain about what these companies should do with their existing wireline businesses. And carriers are talking openly about potential plans to shed these slow-growing parts of their operations in favor of the explosive wireless business.
Indeed, Sprint Corp. expects to spin its local wireline business after its merger with Nextel Communications Inc. closes, using the funds from the spinoff to support the merger. Alltel Corp.’s CEO Scott Ford already has hinted his company could sell its substantial wireline business, and in fact is interested in picking up more wireless properties. After Alltel completes its purchase of Western Wireless Corp., Alltel’s wireline business will account for only about one-third of the company. Today its wireline operations make up more than half of its business.
Meanwhile, some shareholders are upset with U.S. Cellular parent Telephone & Data Systems because they don’t think the company’s stock price represents the full value of its wireless operations. And U.S. Cellular is often mentioned as a prime property for Alltel to pick up.
Back to the grand-daddy merger, one of the main reasons behind Cingular Wireless L.L.C.’s purchase of AT&T Wireless Services Inc. was that Cingular parents, SBC Communications Inc. and BellSouth Corp., knew that a large wireless play was integral to their ongoing successes.
It doesn’t seem all that long ago when the wireline side of the business was king and the wireless segment was the servant. But gradually, a shift began to take place wherein the wireless side of the business started gaining more favor. For me, a turning point occurred when Bell Atlantic Mobility Systems was allowed to publicly disagree with Bell Atlantic Corp. on a key issue before the wireless industry (reciprocal compensation). Now everything has changed. People are migrating from wired services to a wireless future.
“Fixed operators will continue to reap the benefits of superior voice quality and reliability in 2005, generating billions of profitable voice minutes over the course of the year,” said Deloitte & Touche partner Phil Asmundson. “However, they will face increasing challenges from low-cost operators, mobile operators and Voice over IP.”
The trend is also taking place at telecom equipment providers. Lucent’s mobility sector was up 19 percent in the most recent quarter, but the wireline side of its business dragged down earnings.
The “wireless is king” shift isn’t subtle anymore.
