GSM goes national

The new Bell Atlantic/Vodafone AirTouch wireless company now has another formidable competitor with VoiceStream Wireless' announced acquisition of Aerial Communications (see story page 8). The two powerhouses will be close in size, with VoiceStream falling only about 50 million potential customers shy of the new combined Bell Atlantic's 254 million.

With VoiceStream's acquisition of Omnipoint Communications, which was announced in June, VoiceStream licenses will cover 75% of the U.S., putting it on par with AT&T Wireless.

Although VoiceStream's biggest shortcoming is that it still must build out about half of its licenses, the recent deals brought in significant new equity, allowing it to construct networks aggressively.

"This wasn't just VoiceStream getting two companies but also $2 billion in equity," said Don Warkentin, president and CEO of Aerial. "It gives VoiceStream a strong balance sheet to get new financing to grow its business or prepare for other deals down the road." That $2 billion came from a variety of sources, including Finland's former state monopoly Sonera, Hutchison and Aerial's parent company, Telephone and Data Systems.

"It puts them in the position to go out and spend like crazy," said Chris Larson, wireless analyst for Prudential Securities.

VoiceStream's biggest advantage against its national competitors and the new Bell Atlantic/Vodafone AirTouch combination is international roaming. "Each of these announcements has a global component. Only one can offer international roaming with a single handset right now," said Ken Hyres, industry analyst of wireless strategies for Cahners In-Stat Group. GSM handsets that allow users to roam from the U.S. to other parts of the world seamlessly already exist, which means that VoiceStream could begin offering a global plan immediately.

"Whether through formal combinations, partnerships or roaming agreements, VoiceStream is in a great position to be part of a global solution," Warkentin said.

Most agree that the next obvious target for VoiceStream will be Powertel, which covers the Southeast where VoiceStream has no properties. Such a deal likely wouldn't occur for some time though, until VoiceStream digests its recent deals. Pacific Bell's wireless properties could make the next target for a complete nationwide GSM footprint.