VoiceStream is moving closer to building the next national wireless network in the United States, after a series of mergers--including joining forces with Omnipoint--that has helped drive its stock price up more than 640 percent this year.
As the Bellevue, Wash.-based company grows, VoiceStream is getting nearer to taking on Sprint, AT&T and Nextel--the only mobile phone providers that can claim coast-to-coast coverage. All of these companies have their sights set on a mobile phone market that is rapidly growing: By the year 2003, analysts predict that 1 billion cellular phones will be in use worldwide.
The purchase of Sprint's equipment doesn't come with any customers or even access to a wireless spectrum, the "airwaves" over which companies transmit mobile phone voice signals. But VoiceStream already has a spectrum it can use in the area, although both companies had previously sent their customers through Sprint's channels.
"Omnipoint and VoiceStream have already begun to upgrade the existing facilities," Omnipoint CEO Douglas Smith said in a statement. "It's important for this key travel destination to have the world's most popular and most advanced mobile communications system. Now we know it will remain covered."
VoiceStream's series of mergers, which will bring Omnipoint, Ariel Communications and East/West Communications under its corporate masthead by the middle of next year, has set the stage for the first U.S.-based coast-to-coast Global System for Mobile (GSM) network.
The company will have more than 1.7 million subscribers once all its acquisitions are complete, pushing it closer to the subscriber figures claimed by competitors Sprint, AirTouch and other giants.
But analysts say consolidation among small GSM companies is likely to continue as loosely allied companies seek to build a single national network. Already firms offer "roaming" privileges to one another's customers. Roaming allows a subscriber to travel across the country and use another company's network for a small fee.
"I think we will eventually see a national footprint," Dataquest analyst Naqi Jaffery said. "There will be more acquisitions and mergers in this area down the road."
A key target for VoiceStream could be Powertel, a Southeast-based independent GSM provider, analysts say. SoundView Technology Group raised its financial rating on Powertel's stock last week, noting that it could be a key acquisition target in the near future.
But the wild cards in GSM's manifest destiny are SBC Communications and BellSouth. Each company maintains a GSM wireless system, but each also has networks using other technologies. So far neither firm has shown much interest in expanding its networks into other regions or in selling to another provider.
Still, analysts say either could happen. If one of the Bell companies bought VoiceStream, it would create a GSM powerhouse that could begin to compete with Sprint, AT&T and even the planned Bell Atlantic/AirTouch joint venture, analysts say.
SoundView also boosted VoiceStream's rating last week, noting that it was still on the acquisition hunt.
As for Sprint, it says it's shedding the last bit of its network that isn't compatible with its nationwide PCS service, which uses another technology called CDMA.
The companies did not release financial details of the Washington and Baltimore sales.