Customers say they were charged illegally after changing carriers

Friday, April 9, 2004

By PHIL MILFORD
BLOOMBERG NEWS

AT&T Wireless Services Inc., which Cingular Wireless LLC is buying for $41 billion, has been sued by customers who claim that they were illegally charged full monthly rates after switching cellular-phone service providers before the end of a month.

A lawsuit filed March 30 in federal court in Seattle seeks to represent hundreds of thousands of former customers and asks for a jury trial, unspecified damages and reimbursement of legal fees. Redmond-based AT&T Wireless violated the Federal Communications Act and imposed an "unjust and unreasonable" charge by assessing the full monthly charges, the lawsuit said.

The suit reflects some customers' frustration with often difficult-to-understand mobile-phone bills across the industry, and its outcome is unlikely to have a large impact on AT&T Wireless' bottom line, said Todd Rethemeier, an analyst with Soleil Securities Corp. in New York.

"Wireless bills and contracts are very complex," said Rethemeier, who doesn't own the stock. "I don't think it's specific to AT&T Wireless. Usually what happens is the lawyers take home millions in fees, and the members of the class get a coupon for a couple bucks off their bills."

The proposed combination of AT&T Wireless with Cingular, a joint venture between SBC Communications Inc. and BellSouth Corp., would create the largest U.S. cell-phone company. Bear Stearns analyst Phil Cusick has said AT&T Wireless may lose more than 200,000 accounts as rivals woo customers.

AT&T Wireless spokesman Mark Siegel said the company hadn't reviewed the lawsuit yet. He declined comment.

"I don't think investors really give a hoot," said Patrick Comack, a Guzman & Co. analyst who doesn't own the shares. "There may be a little bit more ugliness in the second quarter, but this is a solid company, and the brand is going to be Cingular."

The suit claims that before 2003, billing was pro-rated for partial months as part of cell-phone user contracts. It claims that since then, AT&T Wireless has been charging for a full-month even for customers who canceled "as early as the first or second day" of the monthly cycle.

"Worse yet," the suit claims, some customers "were billed for the remainder of the month plus an additional month" and the company delayed processing requests to move current phone numbers to a new carrier for days or weeks to gain fees.

Customer Germand Godoy of Austin, Texas, brought the suit, which asks to represent a class of customers who switched providers midmonth. Another lawsuit, filed in February in state court in L.A., claims AT&T Wireless used "false and deceptive advertising to bait customers with one plan" before switching them to more expensive plans, the Roger R. Ellis law firm said in a statement.

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