Cingular Vs Verizon, The Gloves Come Off

Its been all quiet on the mobile front. After a flury of mega-billion dollar mergers – Cingular gulping AT&T Wireless, Sprint swallowing Nextel and Alltel taking over Western Wireless – the industry went into a self imposed digestive phase. The prices stabalized, and a general peace broke out amongst various parties. The customer churn stabalized as well. But all that will be history soon, and expect a new round of hostilities. Though you cannot rule-out price wars, this time around network reliance and quality of calls.

This will come at a time when the wireless penetration in the US has grown to over 185 million subscribers. The big three will have a tough time luring people with lower prices – those who cannot afford to pay monthly bills, i.e. children of the lesser (economic) god, are opting for pre-paid plans. At the high end of the spectrum, you have MVNOs like SK-Earthlink getting ready to rumble. The big three will be forced to look for growth the old fashioned way – by stealing from rivals.

“Can You Hear Me Now” message is helping Verizon gain a lot of customers, and with EVDO around the corner, things could get pretty close between Verizon and Cingular. Second quarter was a good indication. As a recap, in the most recent quarter, Cingular added 1.1 million, Verizon 1.9 million and Sprint about 400,000 new subscribers.

Evidence of forthcoming tussle between the giants can be seen in two rather unrelated, yet intimately intertwined news announcements, both involving Cingular Wireless, which desperately wants to put distance between itself and Verizon Wireless. Atlanta-based Cingular has 51.6 million subscribers, and can feel the hot breath of Verizon, with 47.37 million subscribers on its neck. Sprint+Nextel have about 44 million subscribers in total.

First, RadioShack decided to end the multi-year arrangement with Verizon in favor of promoting Cingular. This means, Verizon will experience about 100,000 to 125,000 fewer customer additions per quarter, according to Albert Lin, analyst with American Technology Research. “Cingular seems far more interested in keeping gross additions high and market share in the #1 spot,” Lin writes in a note to his clients today, “Thus, adding a major retailer like RSH is probably going to helpful in achieving that goal.”

At the sametime, the company announced the first phase of its $6 billion network upgrade, which is focusing on improving coverage and network quality. I think this will be the only way to counter the Verizon – ‘our voice is better’ marketing strategy. Cingular now has the spectrum to reallyfill out its network, and perhaps with competition, a reason to spend some serious dollars.

Looks like things are going to be fun again in the wireless business.


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