MCI believes its $1.3 billion investment for 17% of Nextel could leapfrog MCI's wireless communications efforts ahead of AT&T, but the No. 1 long-distance company scoffs at the claim.
AT&T hopes to close its own $12.6 billion acquisition of McCaw Cellular, the nation's largest cellular operator, this summer. Sprint, meanwhile, bought Centel Corp., now known as Sprint Cellular, and is testing wireless personal communications services in Nevada under that brand.
AT&T and Sprint, however, are allied with a different wireless technology than MCI.
MCI will market Nextel's wireless services under MCI's brand; AT&T hasn't said what brand it will use.
Nextel and MCI are trumpeting their wireless service as digital, a newer technology currently employsed by some cellular systems, and claim theirs will be the first nationwide cellularlike service.
"All cellular communications are headed for digital technology, but through this deal we're starting out as a digital system positioned for business and consumer usage in the 1990s," said Gerald H. Taylor, MCI exec VP-group executive. MCI's wireless network will be fully digitized from the outset, while AT&T must spend millions to fully digitize McCaw's wireless service.
Through McCaw, AT&T's wireless network will initially have about 35% coverage of the U.S. MCI's Mr. Taylor predicted 95% wireless coverage by 1996.
A top AT&T executive disagreed. "We will have in 1994 the national network that they aspire to," said Robert Kavner, ceo, AT&T Multimedia Products & Services Group.
AT&T, which has shuffled its agencies, spent about $200 million last year advertising its long-distance service.
The Nextel deal allows MCI to start offering digital wireless communications services almost immediately on Nextel's radio-dispatch network. But while Nextel now offers paging and radio dispatching in many parts of the U.S., its cellularlike service is available only in Los Angeles.
Nextel's cellularlike service will be first marketed in California, where a rollout is being planned for later this spring, according to John Hayden, corporate VP-marketing. Later this year, Nextel voice service will launch in the New York and Chicago areas, Mr. Hayden added. In 1995, the Northeast and Dallas and Houston will be offered.
The wireless market, today split about evenly between business and consumer users, has exploded in recent years.
"All these technologies were founded on business customers, but that's changing fast, as people want to be accessible through a single telephone number that's wireless," MCI's Mr. Taylor said.
No time frame has been set for advertising MCI's new wireless capabilities. Nextel, which turned on its voice service in Los Angeles in August, has been putting off an ad campaign from CKS Partners, Campbell, Calif., apparently because of negotiations with MCI.
Mr. Hayden insisted CKS will remain on the Nextel account, but its role was still being discussed late last week.
Last year, MCI spent an estimated $110 million on ads through Messner Vetere Berger McNamee Schmetterer/Euro RSCG, New York.