BostonGlobe. Deal would make Bell Atlantic largest wireless carrier in US
By Peter J. Howe, Globe Staff, 09/14/99
ight months ago, Bell Atlantic Mobile and British wireless telephone
giant Vodafone Group PLC were slugging it out in a $50 billion-plus
bidding war for AirTouch Communications, the big Western US cellular
phone carrier.
Now the two former combatants are apparently closing in on the deal many
industry analysts think they should have done in the first place: give Bell
Atlantic control of AirTouch's US operations to help the New Jersey-based
carrier become a coast-to-coast competitor with AT&T and Sprint PCS.
Such a move, along with Bell Atlantic's pending merger with GTE Corp.,
would quickly turn Bell Atlantic into what by many accounts would be the
number one US wireless carrier, with well over 20 million subscribers.
It would also allow Vodafone, Britain's largest carrier, to focus better on the
European AirTouch operations it chiefly was seeking when it beat out Bell
Atlantic with a $56 billion offer for AirTouch in January.
As soon as today, the Bell and Vodafone boards are expected to ratify a
deal under which they will put their US wireless operations into a new joint
venture controlled 55 percent by Bell, 45 percent by Vodafone, with no
cash changing hands. The new venture could be worth $80 billion or more.
'Even when these two organizations seemed to be at each other's throats,
given the market forces involved, they absolutely had to get together,'
Andrew Cole, head of the global wireless group at consultants Renaissance
Worldwide, said yesterday. 'There's really just no way they could not do
this deal.'
In New York Stock Exchange trading, AirTouch's American depositary
receipts rose 103/4 to 205 9/16, while Bell Atlantic shares rose 13/4 to
641/4.
Because AirTouch and GTE overlap in some key California, Texas, and
other Western markets, antitrust regulators would probably require the new
Bell-Vodafone AirTouch venture to sell a half-dozen or more big-city
franchises.
As the number of US wireless subscribers climbs over 70 million and calling
costs continue to drop, regional companies like Bell Atlantic are under
intense pressure to expand and keep up with big national brands that can
offer subscribers coast-to-coast calling without exorbitant roaming fees.
Wireless companies are moving quickly toward offering 'all you can eat'
monthly calling plans with a flat rate for 200 to 600 minutes of calls.
Companies like Bell Atlantic that have to make coverage deals with partners
elsewhere in the country - and absorb roaming fees - are at a severe
competitive disadvantage compared to AT&T, Sprint PCS, and Nextel,
which also has a national network but features phones with two-way radio
features that primarily serve a business and tradesman market.
'There's a race on to control customers and a race to control costs,' Cole
said.
Atlanta-based analyst Jeffrey Kagan said that for Bell Atlantic and Vodafone
'it's in both of their strategic interests to put their egos aside and do a deal so
they can both have a national footprint.'
Bell Atlantic and AirTouch are ideal candidates for a combination because
their coverage areas - Bell in the East, AirTouch in the Midwest and West -
fit almost as cleanly as two puzzle pieces. AirTouch chairman Sam Ginn
observed earlier this year that he hoped to negotiate some deal with Bell
because 'our assets fit so naturally together.'
Over the weekend, aides to Bell Atlantic chairman Ivan Seidenberg
confirmed they were talking to Vodafone about 'a US business relationship'
but cautioned that there is no deadline and 'no assurance that any
transaction will result.'
Cole said the Bell-AirTouch talks are part of a trend that will likely lead to
four to six 'super-wireless carriers,' all covering the United States. At least
one is expected to be controlled by MCI WorldCom, which has lagged
AT&T and Sprint in moving into wireless calling. 'We're not even halfway
done with the consolidation we're going to see,' Cole said.
Analysts at the Yankee Group in Boston recently projected that US wireless
phone use will quadruple between now and 2004, rising from 105 billion
minutes in 1998 to 554 billion by 2004 (the equivalent of 80 million people
each making 21/4 hours of wireless calls every week). Growth in faster
wireless connections to the Internet will play a huge role driving up usage,
analysts predict.
Vodafone has interests in 12 other international cellular networks, including
France, Greece, the Netherlands, Malta, and Sweden, and operations in
Australia, New Zealand, Egypt, and Fiji.
After their bitter battle for AirTouch, Bell Atlantic Mobile and Vodafone had
remained partners in a US wireless operation called PrimeCo Personal
Communications LP, which they broke up last month. It has 1.3 million
customers.
This story ran on page D1 of the Boston Globe on 09/14/99.
¸ Copyright 1999 Globe Newspaper Company. |
