Consolidation Alters Competitive Landscape of U.S. Wireless Market.

PALO ALTO, CAlif. -- The U.S. wireless market's competitive landscape has changed dramatically in the past year, with the number of major carriers reduced from six to four. But despite their scale, Cingular Wireless, Sprint Nextel, T-Mobile, and Verizon face just as many challenges as opportunities, according to Frost & Sullivan's latest analysis, A Competitive Analysis of Tier 1 U.S. Wireless Carriers, Post Consolidation.

The analysis takes a concise but comprehensive look at the four major U.S. carriers in terms of their current and future competitive position. One key area is consolidation. Cingular Wireless is in the midst of integrating AT&T Wireless, while Sprint's integration of Nextel Communications won't begin until regulators approve the merger sometime in the third quarter of 2005. Neither company expects to finish integration until the end of 2006, at the earliest.

"With all these changes taking place, distraction levels are high and likely to hamper the ability of both carriers to compete with T-Mobile and Verizon at least through 2006 as they integrate their new partners," says Brent Iadarola, Industry Research Manager for Frost & Sullivan's Mobile & Wireless Communications group. "Although this integration period is a window of opportunity for rival carriers such as T-Mobile and Verizon Wireless, Cingular and Sprint Nextel will continue to be dominant players."

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Cingular and Sprint Nextel also are in the midst of network upgrades to Universal Mobile Telecommunications System/High Speed Downlink Packet Access (UMTS/HDPA) and CDMA2000 1xEV-DO, respectively. Those upgrades are major undertakings, and they're likely to be even more challenging due to the ongoing merger integration within both companies.

One area that's unlikely to change over the next 12 months is push-to-talk (PTT). Sprint Nextel and Verizon are likely to continue dominating PTT because Cingular and T-Mobile haven't publicly announced plans to launch PTT services. However, Cingular will face growing pressure to launch PTT because two of its biggest competitors use the service to attract and retain enterprise customers.

Cingular's biggest Global System for Mobile Communication (GSM)-based rival is T-Mobile, but Cingular is better positioned to cater to business/enterprise users whose applications require data rates of at least 100 kbps, thanks to Enhanced Data Rates for Global Evolution (EDGE). Although T-Mobile will offer EDGE later in 2005, the service initially will be available in only some major markets. By comparison, Cingular's EDGE service is already available nearly nationwide.

The four major carriers' data capabilities are particularly important because although voice still drives the bulk of revenue for all four, data's contribution is steadily growing. Verizon, for instance, earned data revenue of $1.1 billion in 2004, more than twice the amount generated in 2003. In the fourth quarter of 2004, data accounted for 5.6 percent - or $539 million - of its revenue. Meanwhile, Cingular is growing data usage among both consumers and businesses in an attempt to counter decline in voice revenue.

"These trends show that wireless data has moved into the consumer mainstream," notes Iadarola. "However, data revenue must continue growing at similar rates over the next few years to provide an acceptable return on investment for the 2.5G/3G upgrades."

A Competitive Analysis of Tier 1 U.S. Wireless Carriers, Post Consolidation, examines the most significant changes in the wireless market in the past year, while investigating the changes that are yet to come. Executive summaries and analyst interviews are available to the press.

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services, and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics. For more information, visit www.frost.com.

A Competitive Analysis of Tier 1 U.S. Wireless Carriers, Post Consolidation

F360

www.frost.com

Keywords in this release: Consolidation, U.S., wireless, merger, acquisition, Cingular Wireless, Sprint Nextel, T-Mobile, and Verizon, AT&T Wireless, integration, Universal Mobile Telecommunications System/ High Speed Downlink Packet Access, UMTS/HDPA, CDMA2000 1xEV-DO, push-to-talk, PTT, System for Mobile Communication, GSM, Enhanced Data Rates for Global Evolution Release 4, EDGE R4, research, information, market, trends, technology, service, forecast, market share