US mobile operator Cingular Wireless is planning to convert its network to the GSM standard.
Cingular Wireless, the US’ second-largest mobile operator by subscriber numbers, is preparing to convert its network to the GSM standard, which is the world’s most popular. The company will spend $3 billion on GSM infrastructure and handsets, in deals with Nokia, Ericsson and Siemens.
A national US mobile operator needs to use the same technology throughout the country, since otherwise it cannot offer national roaming. The other major operators have decided to standardize on either GSM or CDMA. Since 30% of Cingular’s network currently uses GSM, while the rest uses the similar but incompatible TDMA standard, GSM is by far the easiest way to go.
There are also strategic reasons why GSM is important. Earlier this month, Cingular signed a network sharing agreement with GSM operator VoiceStream. They will share networks in California, Nevada and New York, giving both coverage in all the US’ largest markets for the first time. Previously, Cingular had no operations in New York, while VoiceStream was weak in the West. This agreement effectively sealed Cingular’s move to GSM, making the conversion plans something of a formality.
Cingular’s decision leaves the US mobile market almost evenly divided between CDMA and GSM technologies: AT&T Wireless is also migrating to GSM, while Sprint PCS and Verizon Wireless use CDMA. Now national consolidation is almost complete, the next step for the industry is international consolidation, as is already happening in Europe (not to mention Deutsche Telekom’s acquisition of VoiceStream). This could also be a factor in Cingular’s plans.
Most mobile operators outside the US plan to use the W-CDMA standard for 3G operations. Despite its name, this standard is the standard 3G upgrade path from GSM (CDMA upgrades most easily to CDMA2000). This could Cingular at an advantage. Its handsets will use the same technology as those in Japan and Europe, making it a more attractive merger or joint venture partner. Cingular should be able to offer a wider and more tested range of handsets when it launches 3G.
