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12/30/2004
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Sprint's Wholesale Cell Phone Business Gets Popular

The missing piece in the bundles that telecommunications companies offer consumers is typically cell phone service, which may explain why Sprint Corp. is becoming popular as a reseller of its cell phone service.

The missing piece in the bundles that telecommunications companies offer consumers is typically cell phone service, which may explain why Sprint Corp. is becoming popular as a reseller of its cell phone service. It seems that telephone service provider AT&T and cable operator Time Warner have been negotiating with Sprint to resell its cellular service.

Cable operator Time Warner, which is aggressively launching a nationwide VoIP service, is preparing to test market Sprint's cell phone service in Kansas City. AT&T, which has a nationwide VoIP service in addition to its existing long distance service, is reported by The New York Times to be preparing to unveil its version of Sprint's cell phone service with actual rollout of the service scheduled to get underway in the first half of 2005.

All companies trying to flesh out bundles with Sprint's cell phone infrastructure, however, face a similar hurdle: The launching of a bundle with cell phone service would likely put cell phone service purchased from Sprint in competition with Sprint's retail cell service.

"Sprint's preference would clearly be to win retail customers directly," said Pete Wilson, president of telephony consultancy Telwares Communications. "For Sprint to embrace the wholesale channel is completely to its advantage. It gives Sprint multiple ways to win retail customers."

Noting that Sprint is the third-ranked cell phone service provider in numbers of subscribers, Wilson said its approach of wholesaling its service to other companies enhances its opportunities to compete with market leaders Cingular Wireless and Verizon Wireless. He noted that Sprint's margins from its reselling arrangements are likely to be lower than its margins on its retail Sprint cell phone service.

Wilson added that Sprint's nationwide fiber optic wireline network is another asset in its drive to wholesale its service to cable and other telecommunications companies that don't have their own cellular business.

At the same time, a consortium of cable companies including Comcast, Cox Communications, and Charter Communications has hired a Wall Street investment bank to investigate cell phone opportunities. One of the first opportunities they will examine will undoubtedly be Sprint.

Sprint is in the process of acquiring cell phone provider Nextel Communications, which is already facing a challenge to move much of its service out of public safety bandwidth. Time Warner, which is also a member of the cable consortium exploring wireless possibilities, is easing onto an arrangement with Sprint. Time Warner has said: "We are in talks with Sprint to plan a trial but we have not gotten into details yet about what the long-term relationship might look like." AT&T is expected to outline its cell phone game plan soon, possibly as early as next week.

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