AT&T Wireless Auction Heats Up

A potential bidding war for AT&T Wireless has been set in motion by a chain of events that may trump Cingular Wireless's bid for the mobile-phone service provider.

AT&T Wireless and its equity partner NTT DoCoMo have reached an agreement that would enable DoCoMo to enter the bidding auction.

AT&T Wireless has sent out letters to several prospective bidders instructing them to submit their bids by Feb. 13. DoCoMo owns 17 percent of AT&T Wireless, and two of its representatives sit on the U.S. firm's board. But it was in a bind because it could have been accused of conflict-of-interest if it came to evaluating bids including its own. The new agreement between AT&T Wireless and DoCoMo eliminates the problem.

Even so, DoCoMo remains noncommittal. In a statement Tuesday, the Japanese firm said: "DoCoMo entered into the agreement in order to preserve a broad set of options and has not made any decision to make any proposal to AT&T Wireless at this time."

Wall Street sources have reported that Cingular, which is jointly owned by SBC Communications and BellSouth, has offered $30 billion for AT&T Wireless, whose stock has been in the ascendancy in recent weeks as reports circulated that the firm was an acquisition target. The combination of AT&T Wireless and Cingular would create the nation's largest cell phone provider, with a market share of about 30 percent, leapfrogging Verizon Wireless's 24 percent share.What about the other players? As the world's largest mobile-phone service provider, Vodafone could enter the bidding. It shares the same GSM technology as AT&T Wireless in its non-U.S. global markets. However, it owns 45 percent of Verizon Wireless, and that could represent a stumbling block.

Once the air is cleared over the AT&T Wireless auction, the status of the remaining smaller players is likely to be resolved. With about 10 percent market share, Sprint PCS would likely become an attractive acquisition target. With its underlying CDMA technology, Sprint would appeal to Verizon Wireless, which also utilized CDMA. T-Mobile's 8 percent market share would be a logical fit for the AT&T Wireless-Cingular-DoCoMo group, because its infrastructure technology is also GSM-based.

Nextel Communications has its own unique technology, making it difficult to integrate with any of the other major mobile-phone players. However, Nextel, which has about eight percent market share, has seen its stock rise rapidly in recent months, perhaps giving it the currency to bid for AT&T Wireless.