The non-exclusive, five-year deal will allow AT&T to sell branded wireless service to its more than 35 million business and consumer customers. The company, which is already testing wireless services in select U.S. markets, said it hopes for a launch later this year.
Financial terms of the deal were not disclosed.
AT&T already offers wireless service through AT&T Wireless, the unit it spun off into an independent company several years ago, reports CBS MarketWatch's Jeffrey Bartash. Yet AT&T Wireless is being acquired by Cingular, the company owned by AT&T rivals BellSouth and SBC Communications.
As a result, AT&T will switch to Sprint, which already sells wholesale service to other companies such as Virgin Mobile.
And soon after Cingular completes its purchase of AT&T Wireless, that brand name will revert back to AT&T. AT&T plans to resume use of the AT&T Wireless brand as soon as possible.
"AT&T has proved it is capable of rolling out bundles of new and complex services quickly and cost-effectively, with top-notch customers service, and we are excited to have this important capability that will help us better serve customers," said AT&T chairman and CEO David W. Dorman.
Dorman said AT&T plans to add the wireless service to its AT&T OneRate local and long-distance plans and its CallVantage Voice over Internet Protocol (VoIP) service. The company will also offer handsets that allow customers to make VoIP calls over broadband connections in homes and businesses. That would eliminate the need for AT&T to lease phone lines from local phone companies to offer local phone service.
For Sprint, the company gains another large resale channel and the opportunity to add more traffic to its network, driving down costs and improving revenue.
"We are delighted that AT&T has expressed their strong vote of confidence in the performance and capabilities of our nationwide CDMA network," said Len Lauer, Sprint's president and chief operating officer.
AT&T wants to offer wireless service to attract and maintain customers and to recoup lost revenue. And as the largest supplier of phone service to big corporations, AT&T doesn't want to lose out on more lucrative business contracts.
Consumers, meanwhile, increasingly are choosing "bundles" of phone service -- local, long distance, high-speed Internet and wireless -- all sold under one bill. By offering wireless, AT&T will be able to better compete with rivals such as SBC, Verizon Communications and BellSouth.
"We must have wireless in the bundle. That's what customers want," John Polumbo, CEO of AT&T Consumer, said at an investor conference held in February.
At the same time, AT&T gains the chance to recoup some sales lost when customers switch off traditional landline service and rely primarily on wireless. The migration to wireless has been a key contributor to the long-term erosion in AT&T's long-distance revenue.