Time Warner Mulling Cell-Phone Deal With Sprint

Time Warner Inc. (TWX) is in talks to offer cell-phone service over Sprint Corp.'s (FON) network on a trial basis early in 2005, a source familiar with the matter said Wednesday.

If a deal is struck, Time Warner Cable, a unit of the world's largest media group, would be the only major cable company to offer cell-phone service, meaning it could offer television, high-speed Internet access, traditional phone service and wireless phone service.

Time Warner Cable and Sprint confirmed they were in talks, but declined to discuss timing or other details.

Time Warner is barreling first out of the gate even as several top cable television providers continue to mull grander ambitions to work together to offer wireless services. Time Warner Cable, Comcast Corp. (CMCSA), Cox Communications, Charter Communications Inc. (CHTR) and several other cable companies are members of a consortium.

The source said the consortium has hired investment bank Merrill Lynch to investigate opportunities in the wireless arena that may include an acquisition, although an expensive purchase is unlikely.

Time Warner's current plans do not preclude other possible deals it may strike as a consortium.

Adding wireless services as part of cable's offerings bundle will help it distinguish its services from rival telephone companies, which are vying to break into the video services market, analysts have said.

"We are going to see most of the cable companies start to sell wireless services in 2005, but they will resell an existing provider not install their own networks," said Jeff Kagan, an independent telecommunications industry analyst.

Sprint, which in earlier this month agreed to buy Nextel Communications Inc. (NXTL) for $35 billion, is a natural partner as it has previously established similar ventures with other companies. It currently operates a joint venture with Britain's Virgin Group (search) that targets the youth market. Nextel separately operates Boost Mobile aimed at a similar audience.

Other wireless operators are also seeking to tap a new market for customers through the cable industry. T-Mobile USA (search), a unit of Deutsche Telekom, has said it is interested in finding cable partners, according to an interview with Chief Executive Kai-Uwe Ricke in the Financial Times Deutschland.

The initial Time Warner Cable trial would start in Kansas City, Mo., in the first quarter of next year, the source said, confirming a Wall Street Journal report on Wednesday.

It is likely that the trial would start with employees and other preselected customers and then expand to a few neighborhoods before becoming available for the entire city, the paper said.

The Journal reported that the calls would travel over Sprint's cellular network and Time Warner would handle billing, customer service and marketing.