As AT&T Wireless ( AWE) packs for its Cingular journey, investors are fretting that many subscribers won't come along for the ride.AT&T Wireless, the No. 3 U.S. cell-phone service provider, has spent the last year stumbling in spite of the industry's record-breaking growth spurt. The company's many mishaps -- ranging from poor service quality and software glitches to the onset of number portability -- finally drove it this winter into the arms of a highly motivated buyer, No. 2 wireless power Cingular. But Wall Street analysts say the bleeding is far from over at AT&T Wireless. In fact, some expect the Redmond, Wash., company to suffer an
Wishy WashyThe prospect of a Cingular-AT&T Wireless breakup appears remote. Shvets thinks the deal will go through, barring "something extraordinary." Other analysts agree it would take nothing short of a disaster to derail the deal. Even so, judging by AT&T Wireless' stock price, investors haven't exactly given the pact a full vote of confidence. On Feb. 17, Cingular, a joint venture of SBC ( SBC) and BellSouth ( BLS), agreed to pay $15 in cash for each share of AT&T Wireless. Typically, an all-cash bid from a financially sound company such as Cingular would push shares of the acquisition target close to the merger price. But AT&T Wireless shares never exceeded $14.10 and have mostly traded in the high $13 range. On Thursday, AT&T Wireless slipped 8 cents to $13.64.
But analysts and investors are focusing on the prospect of dramatic subscriber losses. Some say defections on the order of 10% to 20% could prove substantial enough to cause the deal some trouble.
A representative from AT&T Wireless and Cingular said there's no specific provision in the merger agreement governing a change in terms based on subscriber losses.