Courting AT&T Wireless

The wireless rumor mill is in hyper-drive again, this time starring AT&T Wireless (NYSE: AWE  ) . The company must have made known that it was open to courtship, as several wireless service providers have reportedly made offers. It's starting to look like The Bachelorette, corporate style.

Possible suitors include Cingular (a joint venture between SBC (NYSE: SBC  ) and BellSouth (NYSE: BLS  ) ), Nextel Communications (Nasdaq: NXTL  ) , and T-Mobile (subsidiary of Deutsche Telekom AG (NYSE: DT  ) ). And don't overlook foreign hopefuls Vodafone (NYSE: VOD  ) and NTT DoCoMo (NYSE: DCM  ) .

Industry watchers have long expected consolidation in the wireless services sector, but the market squeeze over the last few years has kept CEOs preoccupied. Even the FCC's decision to relax spectrum ownership rules failed to spur M&A in the group.

But the recent implementation of number portability may have been the final nudge. And while AT&T Wireless invoked the wrath of peers, customers, and regulators for difficulty in porting numbers and its internal customer care system, its spectrum holdings and strong brand still make for an attractive prospect.

While I'd give Cingular/AT&T Wireless an award for the most predictable couple, a Nextel/AT&T Wireless pairing is worthy of the tabloids and paparazzi. And that would be quite a tale.

After all, back in 1994, Craig McCaw sold his cellular network to AT&T for $11.5 billion, then went on to transform Nextel into a nationwide powerhouse. Next, AT&T considered buying Nextel. Now, Nextel would be buying McCaw's network back at more than twice the price. McCaw's resignation from the Nextel board and subsequent reduction in stock sales makes this combo all the more sensational.

If nothing else, the popular belief that only networks with common technologies (such as CDMA or GSM) will merge no longer holds. Network technology is not the barrier it was even a few years ago, as multi-mode chips in phones allow users to connect with a variety of network protocols. For certain players, spectrum trumps technology.

But don't get the wrong idea. Even a recent 20% spike in AT&T Wireless shares doesn't mean there's a sensible way for investors to play this M&A drama. Placing bets on the stock of either partner in a potential merger or buyout is gambling, not investing.

Ther real story here is that consolidation should benefit the entire industry. And in the long run, what's good for industry is good for investors.

Dave Mock is now taking bids for his network. He owns shares of Nextel. Dave is co-author of Tapping Into Wireless and can be reached here.

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