T-Mobile Pays $2.5 Billion In Spectrum Swap With Cingular

Any suspicions that T-Mobile might leave the highly competitive U.S. mobile market have been dispelled by the firm's $2.5 billion acquisition of Cingular Wireless's network serving California and Nevada.

T-Mobile, the U.S. unit of Deutsche Telekom, and Cingular announced they would conclude their 2001 agreement for the joint sharing of infrastructure in California and Nevada, as well as in New York. The deal, announced Tuesday, calls for Cingular to also receive 10 MHz of spectrum from T-Mobile in New York.

"All wireless companies are looking to get ubiquitous coverage," said Michael Voellinger, of Telwares, in an interview. "That's what's going on here. There's a lot of swapping of spectrum going on, and it's going to continue." Voellinger, who is Telwares director of wireless services, said it often makes more sense for cell-phone service providers to enter into coverage deals with competitors than to go to the enormous expense of paying for the build-out of new infrastructure.

Just a few months ago, T-Mobile's future in the U.S. was in question, because its partner, Deutsche Telekom, was under pressure and the U.S. business was struggling. But then T-Mobile added 1.2 million subscribers in the first quarter, jumping its subscriber total to nearly 14.5 million. In a statement Tuesday, Deutsche Telekom chief executive Kai-Uwe Ricke said: "We are confident that this investment will accelerate the long-term profitable growth of our U.S. mobile operations."

T-Mobile added that it plans to continue to add more spectrum in the U.S. In the agreement with Cingular, T-Mobile will add 10 MHz of additional spectrum from Cingular in San Francisco, Sacramento, and Las Vegas. The firm also has an option to purchase 10 MHz in the Los Angeles and San Diego areas.Cingular said the original 2001 infrastructure deal with T-Mobile enabled Cingular to enter the New York City market and T-Mobile to enter the California and Nevada markets in a cost effective manner. In a statement, Cingular said: "The joint venture acted as a 'factory,' producing and making wireless minutes available to both carriers while providing consumers a wider choice in wireless service."