NYTimes. Bell Atlantic and Vodafone, Once Enemies, Are Said to Be Near a Deal
September 13, 1999
By LAURA M. HOLSON
ow far they have come in nine months.
The international wireless giant Vodafone Airtouch PLC and the Bell
Atlantic Corp., hostile adversaries in January, are poised to become best
friends in a venture that would consolidate the two companies' U.S.
cellular telephone operations into a separate company with 23.5 million
subscribers and a value of between $70 billion and $80 billion, according
to people close to the talks.
Although people close to both
companies cautioned Sunday
that the negotiations could still
break down as their advisers
worked on the final details, the
companies' boards were
expected to meet in the next
few days to consider the deal in
earnest.
Other than issuing a statement
Sunday confirming that the
discussions were taking place,
Bell Atlantic officials declined
to comment. A Vodafone
Airtouch spokesman said his company would not comment.
Such a pact might have seemed unthinkable early this year, after
Vodafone Group, Britain's largest wireless carrier, snatched Airtouch
Communications, the largest U.S. cellular company, from Bell Atlantic's
embrace in a two-week bidding war that Vodafone won with a $60
billion offer. Vodafone Airtouch, as the combined companies became
known, emerged as the world's largest cellular telephone company.
A better outcome, many analysts said at the time, would have been for
Vodafone and Bell Atlantic to have split the spoils. Bell Atlantic, the
largest land-line local telephone company in the United States and a
wireless player on the East Coast, should have bought Airtouch's
American wireless properties, those analysts said, with Vodafone Group
taking Airtouch's international wireless operations.
The critics' logic was that Bell Atlantic, with 14 million cellular customers,
could take better advantage of the expanded national cellular footprint
that Airtouch's 9.5 million U.S. subscribers would give it, while Vodafone
might be better off concentrating on folding Airtouch's holdings in Europe
into its own extensive European network.
And now Vodafone Airtouch and Bell Atlantic, the heated bidding fury
having given way to cooler reflection, have apparently concluded that
those analysts were right.
For Bell Atlantic, a joint venture with Vodafone Airtouch would give it
the national cellular footprint it has craved for several years. And
Vodafone Airtouch would get an expanded American presence to rival
the national wireless networks of AT&T and Sprint. Vodafone Airtouch
and Bell Atlantic customers would have the advantage of a
coast-to-coast network, while consumers generally might benefit from the
downward pressure on prices that presumably would result from greater
competition.
"This combination becomes the most credible national wireless play," said
Richard Klugman, a telecommunications analyst at Donaldson, Lufkin &
Jenrette Inc. "This all fits and very well and makes sense."
When Ivan G. Seidenberg, Bell Atlantic's chairman and chief executive,
lost the Airtouch bidding in January, people close to him said he was
outraged -- frustrated in part because Bell Atlantic's respectable but not
stellar stock performance made it hard to engage in a bidding war with
Vodafone, which as a fast-growing upstart had a high-flying stock to use
as currency in the Airtouch deal.
Seidenberg, who got his first job in the telecommunications industry as a
19-year-old assistant telephone repairman for New York Telephone, has
aspirations of building a wireless communications empire to rival both
AT&T and Sprint. His announcement in the summer of 1998 of a $53
billion acquisition of GTE by Bell Atlantic, a deal that is still pending, was
a step in that direction. His next move, which began late last year, was his
thwarted pursuit of Airtouch.
Even after Vodafone won the bidding, its chairman, Chris Gent, said
publicly that he still hoped to form a partnership with Bell Atlantic. And
people close to the current talks say that he and Seidenberg began
discussing a joint venture in July.
Bell Atlantic and Airtouch had been partners in a joint venture called
Primeco Personal Communications, which was formed in 1994 to bid on
wireless licenses in metropolitan markets in the United States that neither
company yet served.
But after Airtouch became part of Vodafone, the Primeco relationship
became strained, and in April Bell Atlantic dissolved the venture, leaving
the partners to divide its holdings. That left Vodafone Airtouch without a
cellular presence in the Eastern United States and Bell Atlantic seemingly
even farther away from its goal of building a national cellular network.
One key player in breaking the impasse, according to people close to the
current talks, has been Bell Atlantic's chief financial officer, Frederic V.
Salerno. He has known Gent since the days when Salerno oversaw the
international and wireless operations of the Nynex Corp., before it was
acquired by Bell Atlantic in 1997. Salerno "always thought that it made
sense" to combine Vodafone's U.S. wireless operations with Bell
Atlantic's, a person close to the talks said. "He took losing Airtouch to
Vodafone less personally than Ivan."
Another critical diplomatic role was played by Sam Ginn, the former
chairman and chief executive of Airtouch, who last winter had initially
favored an acquisition by Bell Atlantic, but finally elected to go with the
highest bid. People close to the talks said Ginn, now at Vodafone
Airtouch, encouraged Seidenberg to begin talking with Gent in July.
Seidenberg has conceded that combining the U.S. cellular operations is a
logical idea, said people close to the discussions, with one caveat: that
Bell Atlantic retain control of the operations.
People close to the talks said negotiations heated up about 10 days ago,
soon after Vodafone and Bell Atlantic formally split the Primeco assets.
Vodafone demanded equal control in the venture, they said, but Bell
Atlantic executives balked. As a compromise, Vodafone agreed that Bell
Atlantic would own about 55 percent of the combined company and
Vodafone would own the rest -- with the right to sell its stake back to
Bell Atlantic over the next three to seven years.
Another key point Gent has been willing to concede, these people say, is
that Lawrence T. Babbio Jr., Bell Atlantic's president and chief operating
officer, would oversee the joint venture. "Chris is very level-headed," said
an executive who knows Gent but is not involved in the deal and who
spoke on the condition of anonymity.
Copyright 1999 The New York Times Company |
