AT&T Wireless (NYSE:AWE) is playing the Grinch this holiday season. It is being reported today that software bugs have, for up to three weeks, been preventing the company from accessing -- and servicing -- GSM/GPRS network customer accounts.
How big a problem is this? GSM/GPRS represent 3 million of the company's 22 million customers, and half of all new customer additions are for this service. These are the high-revenue customers who want Internet access and instant messaging.
Some retailers are able to cram activations into the system sporadically, so it is not an all-or-none proposition. But stories of activation problems have reached the news media, so AT&T Wireless' image is being tainted during the holiday season. The company will also issue credits, which will reduce earnings.
AT&T Wireless' problems may also include the inability to easily switch customer phone numbers. Although not named specifically, AT&T Wireless is the only major-six wireless carrier not to use TSI Connections services for switching customers between rivals. Although no serious financial problems should result from this, it has the potential to also tarnish the company's image.
Cell-phone sales are expected to be extremely strong this holiday season, and there is no shortage of competitors -- Verizon (NYSE:VZ), Nextel Communications (NASDAQ:NXTL), Sprint (NYSE:FON), Deutsche Telekom AG (NYSE:DT), and Cingular, a joint venture of SBC Communications (NYSE:SBC) and BellSouth (NYSE:BLS).
Competitor sales representatives will augment slogans like "Can you hear me now?" with "Do you want activation now?" It will be a powerful sales message during this peak selling season.
Unlike the Grinch's experience, the village will not be happy without their material goods. Eventually, AT&T Wireless will correct its problems -- but when? Expect new activations to be negatively affected and AT&T Wireless' stock to suffer.
The company carries a hefty $10.6 billion in total debt, though it also has $4.3 billion in cash. The market capitalization of $20 billion prices the stock at an extremely high 53 times trailing earnings. Investors are certainly looking for good news ahead. At $7.40, the stock is well off its all-time high of $27.30 but more than double the all-time low of $3.15 reached in October 2002. Year-to-date, the stock is up 30%.
As an information technology consult, W.D. Crotty is familiar with software bugs and their effect on the bottom line. Visit the AT&T Wireless discussion board to discuss the company's problems with W.D. and other investors. You can email W.D. at [email protected] .
