AT&T Sets Venture to Expand Wireless Reach - TheStreet

AT&T Sets Venture to Expand Wireless Reach

The phone giant and Dobson Communications agree to buy an operator of Cellular One franchises.
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AT&T

(T) - Get Report

and closely held

Dobson Communications

agreed Wednesday to buy

American Cellular

, an operator of

Cellular One

wireless-network franchises, for $2.32 billion.

The move to extend AT&T's wireless reach comes one day after

MCI WorldCom

(WCOM)

agreed to acquire

Sprint

(FON)

in the largest corporate merger ever, a $115 billion deal that

hinged on Sprint's vast national wireless network.

Dobson, a closely held cellular company, provides service in rural markets, as does American Cellular. AT&T and Dobson each will spend $370 million on the deal, financing the remainder with bank debt. Dobson will be responsible for daily operation.

The venture represents by far the biggest growth spurt ever for Dobson, almost doubling the area of its coverage and its base of subscribers. Founded in 1936 as Paradise Telephone Co., Dobson's growth has come by piecemeal acquisitions. It started offering cellular services in the Texas Panhandle and western Oklahoma in 1990, and has since grown to serve 401,680 customers as of June 30.

The deal makes Dobson responsible for 398,000 new subscribers, for whom the newly formed joint venture paid around $5,829 apiece. The company's average revenue per subscriber has steadily shrunk as Dobson's subscriber base has grown, dropping to $33.92 in June 1999 from $37.92 in June 1998. During that time, Dobson gained around 90,000 new subscribers.

American Cellular has subscribers in New York, Wisconsin, Minnesota, Michigan, Kentucky, Tennessee, West Virginia, Ohio, Pennsylvania and Illinois. It operates under the Cellular One trade name, which is owned and franchised by the regional phone company

SBC Communications

(SBC)

and

Western Wireless

(WWCA)

.

AT&T is looking to "extend our wireless footprint and technology," Dan Hesse, president and CEO of

AT&T Wireless Services

, said in a news release. Representatives for the companies didn't immediately return phone calls.