AT&T To Buy Centennial For $944 Million

In a move that expands its wireless footprint and adds subscribers, AT&T on Monday said it will purchase Centennial Communications Corp. for $944 million.

The deal adds about 1.1 million subscribers to AT&T, giving it nearly 75 million wireless customers overall. AT&T is the leading U.S. mobile operator in terms of subscribers, but it will be soon be pushed into second place once Verizon Wireless' $28 billion purchase of Alltel is completed.

The purchase of Centennial also will expand and strengthen AT&T's wireless footprint. Centennial has large holdings of spectrum mainly in the Midwestern and Southeastern United States, as well as in Puerto Rico and the U.S. Virgin Islands. The company also is the licensee of the 850-MHz spectrum, and that will let AT&T will provide improved service quality for existing customers in Indiana, Louisiana, Michigan, Mississippi, Ohio, and Texas.

"This acquisition offers important benefits for wireless customers of both AT&T and Centennial," said Ralph de la Vega, CEO of AT&T Mobility, in a statement. "Our existing customers will enjoy a better on-network calling experience in the current Centennial roaming areas. And Centennial customers will have access to a mobile-to-mobile network of nearly 75 million subscribers, AT&T's national and international roaming capabilities, our terrific device offerings, and our great portfolio of applications and services."

AT&T had a tremendous third quarter in the wireless division thanks to the debut of the highly anticipated iPhone 3G. But some analysts said that could be a one-time event, and the wireless carrier needed to find other ways to grow its subscriber base.

"The wireless market is fairly mature in the United States in that there isn't a vast pool of brand new customers," said Pete Dailey, analyst with Stratecast. "By and large, I think you'll see continued industry consolidation because it's the easiest way to gain subscribers, and then companies can layer on additional services and features to increase ARPU."

Dailey sees more and more small players being acquired because they do not have the capital to invest in upgrading networks, particularly with the economic climate right now. He said he expects there to be only three or four U.S. providers in the near future until there is a disruptive technology that allows a new competitor to come in and compete.