With AT&T Wireless' (NYSE: AWE ) poor customer satisfaction ratings, fleeing customer base, and worsening financials, you'd think Cingular would want customers to forget that it is acquiring the beleaguered company. Think again.
Cingular, a joint venture of BellSouth (NYSE: BLS ) and SBC Communications (NYSE: SBC ) , and AT&T Wireless have been tangling with AT&T (NYSE: T ) for months over licensing rights, wanting to keep the AT&T Wireless brand name as long as possible. Yesterday, the three firms finally reached an agreement.
Under the deal, Cingular, which will pay $41 billion to acquire AT&T Wireless later this year, will get to keep the AT&T Wireless name for six months in exchange for buying $100 million of network services from AT&T. After that time, the troubled telecom could pick up the brand for its own use. AT&T currently sells wireless services through a partnership with Sprint (NYSE: FON ) .
Although I'm glad to see a dispute like this end, I'm confused as to why there was a fight in the first place. I thought the reason for the deal was to expand Cingular's network to make it more competitive with chief rival Verizon (NYSE: VZ ) . How does the AT&T Wireless brand, which recently has stood for little more than poor service, help with that effort? Why not just drop the name after the deal closes? Everything will be under the Cingular banner six months later anyway.
What irks me the most is that I don't see how this whole mess has done anything to benefit investors. All it did was add costs. And even though there are merits to the combination, I can't envision a short-term win for anyone other than AT&T Wireless' and Cingular's competitors. Too bad it's too late to hang up on this deal.
For more Fool coverage of the AT&T Wireless-Cingular merger:
- Cingular's two wrongs could make a right for investors.
- Cingular's sellout makes room for the merger.
- Customers aren't likely to attend the wedding of the two telecoms.
- Especially after a bum Q1 for AT&T Wireless.
Think I'm too dour on telecom and AT&T Wireless' prospects? Have more insights to share on the telecom industry? Then you might want to read our duel about telecom stocks. It's the kind of bare-knuckles analysis you'll find only at Fool.com.