December 26, 2000, 1:36 PM — THE ANNOUNCEMENT MONDAY that West Point, Georgia-based regional wireless provider Powertel will ultimately be owned by Deutsche Telekom may boost the uptake of GSM (Global Systems for Mobile Communications) technology in the United States.
Powertel, along with Bellevue, Wash.-based VoiceStream Wireless, which DT is buying in a deal valued at $50.7 billion, are both providers of wireless solutions based on GSM technology, which is widely used in Europe, but has not made inroads into the U.S. market.
Although it is VoiceStream that is actually acquiring Powertel, DT's involvement and the price the German carrier has been willing to pay for U.S. wireless companies has forced the Powertel buy into the spotlight.
Ultimately, DT will fork over about $5.9 billion for Powertel and relieve the company of about $1.2 billion in debt.
Behind the eye-popping price tags on both Powertel and VoiceStream is the fact that both companies have banked on GSM, which also may get a boost from the deals. A digital radio standard spawned by the European Telecommunications Standards Institute, GSM has not been adopted in the United States, which instead relies on CDMA and TDMA wireless standards.
"A large factor in GSM not catching on here has been the fact that there has been no brand-name company behind it," said Jeffrey Kagan, an independent telecommunications analyst based in Atlanta.
But the DT-VoiceStream deal -- and now the Powertel add-on acquisition -- could raise the profile of GSM, Kagan said.
VoiceStream bills the deal as a way to build out its GSM coverage in the Southeastern region of the country. Powertel has 25 million subscribers in 12 states where VoiceStream has no presence.
"This acquisition helps VoiceStream become more of a national player, and GSM could therefore become more relevant in the U.S. market," Kagan said.
Because emerging Third Generation Wireless (3G) technology is supposed to ultimately bridge the "hodge-podge" wireless technologies in the United States, any surge in GSM will not create any real difficulties for other carriers.
"Long-term it won't be a problem," Kagan said. "But we are in a time of transition, and transitions are never pretty."
Many enterprises with overseas presences may watch carefully any rise in the use of GSM in the United States, " he continued.
"Multinational companies would like the idea of going from one vendor to get a handset that works everywhere they go. It makes things less complicated," Kagan said.