McCaw Cellular Is the Prize AT&T Has Been Striving For
MCCAW Cellular Communications Inc., which has done more than any other company to put phones in Americans' cars and pockets, is a step closer to disappearing.
The United States Justice Department gave its blessing Friday to AT&T Corporation's $12.6 billion purchase of McCaw, announced last year. The agency cleared away antitrust concerns with a consent decree requiring AT&T to keep the cellular operation under separate management and give other long-distance carriers ``equal access'' to serve as relayers of wireless calls.
Though there are still two more legal and regulatory hurdles for the stock-swap buyout, the companies say they expect the merger to conclude by September. McCaw's quarterly earnings report this week may be the last chance for the Kirkland, Wash., company to post a profit (something the debt-laden company has yet to do) before uniting with AT&T.
McCaw rose from obscurity to industry prominence under a young, visionary leader. As a student at Stanford University, Craig McCaw ran a family cable-television business. More than a decade later, he began to focus on the nascent cellular industry as a major opportunity. ``Junk'' bond whiz Michael Milken helped finance the company's growth in the mid-1980s.
Chief Executive Officer McCaw talks up the notion of phone numbers being associated ``with a person and not a place.'' This ``seamless roaming,'' where phone numbers follow customers around the country, is coming closer to reality. McCaw has partnered with other companies to form a North American Cellular Network covering much of the US and Canada. The Baby Bells, which provide cellular service within their regional wire-phone domains, have a network called MobiLink.
McCaw and his team have ``been brilliant in using technology hyperbole to leverage their shares,'' says telecommunications analyst Herschel Shosteck, president of Herschel Shosteck Associates in Silver Spring, Md.
The fast-growing cellular industry, with 16 million customers and $11 billion in revenues in 1993, is one the long-distance carriers want a piece of. Wireless phones could become a vehicle for bypassing the Baby Bells, which charge hefty fees to the long-distance companies when they connect calls. Already cellular calls bypass the local loop, but the cost of wireless must continue to fall much further for it to be a vehicle of choice for long-distance calls.
As the nation's biggest cellular carrier, with 3 million subscribers and service areas covering roughly 35 percent of the US population, McCaw is a plum for AT&T. Long-distance rival MCI Communications Corporation is scrambling to find its own wireless strategy. MCI is taking a minority stake in Nextel Communications Inc., a mobile-radio company that potentially could offer cellular-like service to 84 percent of Americans. But Nextel has ``a long ways to go,'' says industry analyst Jeffrey Hines of PaineWebber, an investment house. The new kid on the airwaves has yet to build its costly network.
``Clearly AT&T ... will be in the superior position,'' among the big three long-distance carriers, says Ira Brodsky, president of DataComm Research in Wilmette, Ill.
Another threat to existing cellular service is ``personal communications services,'' a technology for lightweight pocket phones fostered by a forthcoming auction of spectrum by the Federal Communications Commission. But PCS signals won't travel very far, making the technology ill-suited for calls from moving vehicles, notes Dale Hatfield, president of Hatfield Associates, a Denver consulting firm.
Cellular companies already have their systems in place, and are moving fast to deploy digital technology to expand their capacity. Prices are falling, luring more people into the cellular fold. The average monthly bill for 250 minutes of local calling is $82, Mr. Shosteck says.
AT&T still must get a waiver from the consent decree that broke up the Bell System a decade ago, which forbids any AT&T purchase of properties owned by regional Bell companies. A hearing is scheduled for Thursday before US District Judge Harold Greene in Washington. The other hurdle is getting FCC approval to transfer cellular-service licenses from McCaw to AT&T.