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Home >> Computing >> Computing >> Cingular Att Merger Combine Different Distribution Strategies >> Cingular, AT&T Merger To Combine Different Distribution Strategies
The merged Cingular-AT&T Wireless company could turn out to be more friendly to the indirect channel than AT&T was as a separate carrier.
Nonetheless, retailers and agents say they don't yet know how Cingular's acquisition of AT&T Wireless will affect the merged entity's marketing and commission programs, nor are they certain how many overlapping distribution outlets will be closed after the merger.
All that Cingular would say was that "we're looking at the locations and strengths of all distribution centers to determine which ones add the most value to the combined company going forward."
However many outlets are left, the merged entity could be more indirect-friendly because the acquired company, AT&T Wireless, activates most of its new subscribers on a direct basis, while Cingular signs up most of its subscribers through indirect agents and retailers.
AT&T's direct sales occur in large part through its company-owned stores and kiosks, which account for only 1,100 of the carrier's 20,000 retail "points of presence," a spokesman said. The outlets include small agents and large retailers like 7-Eleven, Best Buy, Target, Wal-Mart and Toys 'R' Us. Other direct channels include the company's B-to-B sales to large corporations.
The majority of Cingular's gross additions occur through the indirect channel, said Yankee Group analyst Adam Guy. Although Cingular owns 1,700 stores and kiosks, he said, "Cingular relies more heavily on indirect agents," which number 8,000. About two-thirds of those agents operate Cingular-branded stores through a franchise-type arrangement and sell Cingular exclusively, the carrier said.
All told, Cingular boasts of sales through 88,000 storefronts, kiosks and B-to-B agents. AT&T said it sells through only 20,000 outlets, contrary to Cingular's previous statements that AT&T sells through 70,000 outlets, an AT&T spokesman said.
With so many outlets in so many overlapping markets, the merger will lead to closures of select AT&T- and Cingular-owned outlets on a market-by-market basis, Guy said. Cingular operates in 87 of the top 100 markets, and AT&T operates in 97 of the top 100.
One retailer thought the closures would be minimal. "I think most of their distribution is complementary, except where there is very close geographic overlap," he said. "I can't see them reducing the number of stores except where there is direct competition, as in malls."
The primary impact, he contended, will be felt by nonexclusive retailers who sell both brands. They include Best Buy and Wal-Mart, for example.
In consumer electronics channels, Guy noted, both carriers have a "roughly equivalent presence" in large chains. AT&T Wireless said it is sold in such major chains as 7-Eleven, Wal-Mart, Toys 'R' Us and Best Buy. Cingular's indirect channel includes Best Buy, CompUSA, Good Guys, Staples, Sam's Club and Wal-Mart, said Guy.
Circuit City sells T-Mobile and Verizon.
Whatever the acquisition's impact on distribution channels, Cingular said it had other things on its mind when it courted AT&T. Among them: the economies of scale in becoming the nation's largest carrier by subscriber base and the need to expand its footprint to more markets. The acquisition, for example, will make it unnecessary for Cingular to resell T-Mobile service in the New York market, where AT&T operates a network.
Cingular also bought AT&T to obtain additional spectrum for rolling out third-generation W-CDMA service. AT&T had enough spectrum to roll out W-CDMA in many markets, but Cingular might have been able to do so in only a handful, Guy said.
Another reason was AT&T's extensive business-customer base of Fortune 100 and 500 companies, said Cingular, which described its consumer base as broad.