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AT&T to re-enter wireless market

AT&T Corp. will get back into the mobile phone business later this year using Spring Corp.'s network, the company said Tuesday.
/ Source: Reuters

AT&T Corp., the leading U.S. long distance telephone company, will offer mobile phone service later this year using Sprint Corp.'s network, AT&T said on Tuesday.

AT&T, which spun off its mobile business three years ago, said it will get back into the mobile phone business without laying out a significant amount of money under its five-year agreement with Sprint. The two did not reveal financial terms.

Sprint's shares jumped 3 percent after the news.

The move will help AT&T compete with operators like Verizon and SBC Communications Inc., which already use their stakes in the top U.S. wireless services to combine mobile offers with their declining traditional businesses.

Cingular Wireless, part-owned by SBC, agreed to buy AT&T Wireless Services Inc. in February.

AT&T was testing the possibility of re-entering the mobile industry in a few markets through a partnership with AT&T Wireless when the Cingular deal raised the prospect that it could instead reclaim its old brand.

While resale deals can bring slim profits, analysts said the agreement will let Sprint make more use of its network and help AT&T keep and win customers by bundling wireless with other service.

"It's certainly good for Sprint," SurTerre Research analyst Todd Rethemeier said. "I haven't seen too many companies that have made a lot of money from reselling wireless services, but it will help AT&T bundle products."

Operators such as Sprint, Verizon, SBC and BellSouth Corp. already see the combination of wireless and traditional phone services as a key to keeping customers and boosting business amid fierce competition for both services.

Growth in the U.S. wireless market has declined in recent years as the number of people who have not already signed onto a mobile phone service declined.

AT&T will be able to sell mobile services under its own brand again after the close of the Cingular/AT&T Wireless deal, expected to happen in the fourth quarter.

AT&T could begin offering mobile service before then as long as it does not use the AT&T Wireless brand.

Sprint has established itself as a wholesale provider of wireless services to other operators with deals with companies such as Qwest Communications.

Its joint venture with Richard Branson's Virgin, which targets younger consumers with the Virgin Mobile USA brand, had one of the industry's highest growth rates in recent quarters.

AT&T will try to differentiate itself from Sprint by running its own wireless billing systems and offering its own service packages and Internet content, the company said. It also plans to use emerging technology to combine its services.

As mobile handset integration with the short-range wireless Internet access technology known as Wi-Fi improves over the next 18 months, AT&T said it would offer businesses and consumers mobile handsets that support Internet voice calls.