Cingular Sells Surplus Assets to Fund Merger

T-Mobile USA has entered into agreements with Cingular Wireless to terminate their wireless network sharing joint venture and for T-Mobile USA to acquire 100% ownership of the shared networks in California and Nevada for US$2.5 billion. The purchase price of US$2.5 billion for the GSM network in California/Nevada will be offset by US$200 million related to the unwinding of the joint venture, resulting in a net cash payment of approximately US$2.3 billion to Cingular. In addition, T-Mobile USA will provide network services to Cingular under a wholesale arrangement until Cingular's customers in these markets transition to the networks it will acquire through its pending merger with AT&T Wireless

T-Mobile is to also transfer 10 MHz of New York spectrum in exchange for certain California spectrum owned by Cingular as specified in the termination provisions of the joint venture agreement, and acquire an additional 10 MHz of spectrum from Cingular in certain key California markets for US$180 million.

Deutsche Telekom's projection for the T-Mobile USA customer base at the end of 2004 has increased to more than 16 million. The estimate for the long-term customer base has been increased to between 30 and 35 million from current market estimates of around 25 million over a ten-year horizon.

The wholesale arrangement for network services provides T-Mobile with a minimum guaranteed revenue stream of US$1.2 billion based on network usage over a time period of up to four years. This agreement provides for the orderly transition of Cingular's customers off the networks in California/Nevada and New York City and ensures more efficient use of the California/Nevada network as T-Mobile USA's nearly 1.7 million customer base in these markets continues to grow to utilize the additional capacity being vacated by Cingular's customers.

The additional 10 MHz of spectrum T-Mobile USA will acquire for US$180 million as part of this transaction is in San Francisco, Sacramento and Las Vegas. The purchase option for an additional 10 MHz relates to spectrum in Los Angeles and San Diego. T-Mobile USA will continue to have the use of Cingular's spectrum currently utilized by the joint venture until Cingular's customers transition off the networks.

The transaction is subject to the approval of Cingular's acquisition of AT&T Wireless by U.S. anti-trust authorities and the Federal Communications Commission (FCC), and other regulatory approvals. Closing of the transaction is expected for the beginning of 2005."

Posted to the site on 26th May 2004