Cingular tech transition a costly venture

Behind the announcement that Cingular Wireless has struck equipment deals with Nokia, Siemens and Ericsson lies the reality that the carrier's network upgrade from TDMA to GSM/EDGE will cost more than originally anticipated.

The three vendors claim they stand to reap a combined $4 billion from Cingular over the next three years with Nokia getting more than $1 billion for high-speed wireless network equipment and Ericsson winning about $2 billion in equipment. Siemens, meanwhile, said Cingular would be buying more than $500 million in gear, including handsets.

“It all does add up to $4 billion, but a lot of this includes EDGE, and my feeling is that EDGE won't get out into the market in next two and a half years,” said Robin Hearn, an analyst at Ovum.

Cingular maintains that its own $2.6 billion to $2.8 billion estimate for the technology transition refers only to the GSM overlay.

“The numbers we have put forth have to do just with the GSM overlay of our TDMA network,” said Bill Clift, Cingular Wireless CTO. Clift said there could be additional future costs as it continues servicing its existing GSM markets and moves forward with EDGE. About 30% of Cingular's pops are covered by GSM networks. It is planning some green field buildouts in the near future.

“There will be some additional cost, but it will not be huge,” Clift said.

Cingular's more conservative estimate may have been motivated by the desire to not commit itself to future capital expenses in a rocky economical climate with uncertain wireless data services.

“I have no problem with the two different estimates. Obviously Cingular wants to play down its capex in this type of environment and vendors need to push contract prices up,” Hearn said.

The deal does prove that EDGE will take time before it reaches deployment stage, he added.

“It also brings up the fact that CDMA operators can get further ahead in their upgrade path by spending less.”

Cingular made its vendor selection public after announcing on Oct. 30 that it would spend $3 billion to rebuild its network. The carrier hopes to complete the build by 2004.