In a major step toward completing the expected GSM mobile realignment in the USA, T-Mobile USA agreed to pay $2.3 billion for Cingular’s 1900 mHz mobile systems in Nevada and California. Cingular will lease back capacity from T-Mobile for use by Cingular’s legacy 1900 mHz customers who have not yet converted to Cingular’s rebuilt GSM 850 system.
Cingular is moving to GSM 850 through its merger with AT&T Wireless. The merged company will have a critical mass of 850 mHz licenses in major U.S. markets.
The Associated Press focuses on the aspect of the deal that brings an end to the joint venture between Cingular and T-Mobile that allowed each company to create a nationwide GSM service footprint. With the expected completion of the Cingular-AT&T Wireless merger, Cingular will effectively have a nationwide GSM footprint, albeit on the non-tradtional 850 mHz frequency. This gives Cingular the flexibility to sell off a major piece of its pre-merger infrastructure to the carrier in the United States that would value it most highly.
Deutsche Telekom, the parent company of T-Mobile USA, believes that 20 percent of its future subscriber growth will come from the California-Nevada area. T-Mobile USA is also the fastest growing business in Telekom’s portfolio. It’s for these reasons that this deal is very positive from their perspective.