Another regional player is set for extinction.
Earlier this month, AT&T Mobility announced plans to acquire Centennial Communications Corp. for $2.8 billion. The deal is expected to add approximately 1.1 million customers to AT&T Mobility’s customer base. The deal, if approved, will also see yet another of the few remaining publicly traded, regional carriers absorbed by a larger rival, which has become a common practice during the past several years.
Keith Mallinson, president of industry analyst firm WiseHarbor, said the transaction spells an end game for competition in the wireless space, noting the wireless market is now dominated by two big players.
“The rest are small fries,” Mallinson said. “They’re minnows in comparison to the carriers that are buying them up. It’s difficult to get that excited about it.”
Recent years have witnessed AT&T Mobility pick up Dobson Communications Corp. and a handful of smaller players; Verizon Wireless pick off Rural Cellular Corp. and Alltel Communications L.L.C.; and T-Mobile USA Inc. acquire SunCom Wireless Holdings Inc. Sprint Nextel Corp. has kept most of its acquisitions in-house, buying nearly all of its former network affiliates.
While the rash of deals have left few remaining targets, Mallinson said he expects the trend to continue.
“[There are] two monsters, a couple of others and then it falls away completely after that,” he said. “A lot of these smaller rural [carriers] have just been sitting and waiting for someone to come and buy them.”
Mallinson said at this point all of the smaller carriers are vulnerable save for Leap Wireless International Inc. and Metro PCS Communications Inc. Mallinson noted that those two carriers offer a unique service that allows them to stand out in a crowded field. The two operators recently announced an extensive roaming pact that will allow them to broaden their coverage area to their customers, but Mallinson said he believes Leap and Metro’s best bet for long-term security is to merge.
Deal details
AT&T Mobility said the transaction would enhance its coverage in the rural areas of the Midwest and Southeast United States and in Puerto Rico and the U.S. Virgin Islands.
“Mobility is a vital investment area for AT&T and our company’s biggest growth driver,” said Ralph de la Vega, president and CEO of AT&T Mobility’s parent company AT&T Inc. “This transaction enhances network coverage for our consumer and business customers and is expected to create long-term value for AT&T’s stockholders.”
The most complicated aspect of the deal will involve AT&T Mobility’s integration plans for Centennial’s CDMA-based Puerto Rico operations.
“It’s a problem for a carrier when it has the two technologies,” Mallinson said. “Parent carriers [typically] like to have the same technology.”
Bill Ho, analyst at Current Analysis, said the deal provides an opportunity for AT&T Mobility to enhance its position in the competitive Puerto Rico market.
“Though AT&T operates there in wireless, the island has an interesting wireless plan mix anchored by regional unlimited calling,” Ho said. “Centennial, Claro and Suncom (now T-Mobile) offered these unlimited plans. Sprint and AT&T offer the traditional plans but AT&T also offers free incoming plans, something I don’t think is available in the mainland. So one wonders if those Centennial plans will go away (most likely) or AT&T uses Puerto Rico to experiment with some wireline-wireless service offerings given the variety of regional unlimited calling options available to Puerto Ricans.”
Enhancing wireline services in Puerto Rico is part of the plan, AT&T Mobility spokeswoman McCall Butler said.
“We do see value in Puerto Rico, in wireless and wireline,” she said. “[They have] great presence with enterprise customers on the wireline side. We see that as a way that we can better serve our customers that have extensive operations in Puerto Rico.”
Butler added AT&T Mobility will not be releasing any specifics on the deal until it closes, which is expected to happen during the second quarter of next year.
