BELL ATLANTIC AND VODAFONE AIRTOUCH
PR Wire
September 21, 1999, 5:12 a.m. PT
To Form New U.S. National Wireless Competitor
With GTE, Will Create Coast-to-Coast Footprint
Serving Largest U.S. Wireless Customer Base
NEW YORK and LONDON, Sept. 21 /PRNewswire/ -- Bell Atlantic Corp.
(NYSE: BEL) and Vodafone AirTouch Plc (NYSE: VOD; London:) today announced
that they have reached a definitive agreement to create a new wireless
business -- with a national footprint, a single brand and a common digital
technology -- composed of Bell Atlantic's and Vodafone AirTouch's U.S.
wireless assets.
Including GTE's wireless assets, the new business, with a value in excess
of $70 billion, will serve approximately 20 million wireless customers and
3.5 million paging customers throughout the United States, making it by far
the largest wireless business in the country. The new enterprise will have a
footprint covering more than 90% of the U.S. population, and 49 of the top
50 U.S. wireless markets, with 254 million gross POPs.
The new wireless business combines assets from Bell Atlantic Mobile,
AirTouch Cellular, PrimeCo Personal Communications and AirTouch Paging. It
will be further strengthened by the addition of the cellular and PCS assets of
GTE Corp. (NYSE: GTE), which is expected to complete its merger with Bell
Atlantic in approximately the first quarter of 2000. Bell Atlantic-GTE will
own 55% and Vodafone AirTouch will own 45%. The companies expect to complete
the wireless transaction in six to 12 months.
The agreement also provides that Bell Atlantic and Vodafone AirTouch will
work together on global business synergies, such as coordinated handset and
equipment purchases, global corporate account programs, global roaming
agreements, and development of new services, technologies and applications.
Ivan Seidenberg, chairman and chief executive officer of Bell Atlantic
said, "Through this combination, we are creating the leading wireless business
in the United States. This is a logical fit, naturally uniting our U.S.
properties and strong management teams, and enhancing the benefits of Bell
Atlantic's merger with GTE.
"The launch of this great new enterprise is superbly timed to capitalize
on a historic trend which is altering the future of the telecommunications
industry -- the adoption of wireless into the mainstream of American life."
Vodafone AirTouch Chief Executive Chris Gent, said, "This agreement represents
a major step forward in our U.S. strategy. In a market where penetration
levels are relatively low but growth looks set to take off, gaining a
nationwide footprint with common technology is of paramount importance in
order to remain competitive.
"By participating in the creation of what will be the largest and best
wireless business in the U.S., eliminating the cost and complications of
alternative routes to national coverage and which should be accretive to
proportionate EBITDA from the beginning, we expect to maximise value for our
shareholders.
"In addition, the new business will achieve further benefits from close
cooperation with our other operations around the world."
GTE Chairman and Chief Executive Officer Charles Lee said, "The addition
of Vodafone AirTouch's U.S. domestic wireless assets will greatly accelerate
the execution of Bell Atlantic's and GTE's strategy to bring a new, national
full-service competitor to the U.S. telecommunications industry. The national
coverage area of the new business, with a solid presence on both coasts as
well as in the Midwest and the South, significantly increases the area in
which Bell Atlantic-GTE will offer both wireline and wireless services. It
will increase our opportunity to offer customers around the country a full
bundle of communications services. The result will be increased competition
for other national players and the creation of an engine for industry-leading
growth."
The boards of directors of Bell Atlantic and Vodafone AirTouch have
approved the transaction. The board of directors of GTE has voted in consent
of the transaction consistent with its rights under GTE's merger of equals
agreement with Bell Atlantic. The Bell Atlantic-Vodafone AirTouch wireless
agreement and the Bell Atlantic-GTE merger are independent transactions. The
completion of one is not contingent upon completion of the other.
Benefits of the Wireless Business
The new wireless business, together with GTE's wireless properties, will
have the national scale and scope to realize revenue enhancements, cost
savings and capital efficiencies, which Bell Atlantic estimates has a net
present value of approximately $7.4 billion. Vodafone AirTouch also believes
that revenue enhancements, cost savings and capital efficiencies will be
significant. Incremental revenue growth is expected to be driven by a new
national brand and enhanced product innovation.
The companies expect the new business to achieve expense savings through
reduced roaming costs, lower customer churn and increased economies of scale
in transport, billing volumes, handset purchases and advertising. Combining
the properties' common CDMA (Code Division-Multiple Access) technology
platforms will also yield capital efficiencies, simplified integration and
superior network quality.
The new wireless enterprise will offer products and services on a national
basis under a name consistent with the overall re-branding of the combined
Bell Atlantic-GTE. It will also offer enhanced value for both consumers and
businesses, including flat-rate coast-to-coast pricing plans and the
accelerated rollout of next-generation, advanced wireless data services.
Headquarters, Board and Management
The Bell Atlantic-Vodafone AirTouch wireless enterprise will be managed by
Bell Atlantic. The new wireless enterprise's board will have seven members,
with four designated by Bell Atlantic and three by Vodafone AirTouch.
Mr. Seidenberg and Mr. Gent will be board members. Once the Bell Atlantic-GTE
merger closes, Mr. Lee will also become one of the seven board members.
Bell Atlantic will nominate the chief executive officer of the wireless
enterprise, and Vodafone AirTouch will nominate one other significant officer,
initially the chief financial officer. Other leaders of the new business will
be chosen from among the three companies. Headquarters will be located in the
New York metropolitan area.
Approval Process
The transaction will require expiration of the applicable Hart-Scott-
Rodino waiting period and approval by various regulatory authorities. The
companies will explore various options to address overlapping properties,
estimated to amount to 3 million wireless customers and approximately
49 million POPs after the addition of the GTE properties.
The transaction will also require the approval of the shareholders of
Vodafone AirTouch. It will also be subject to the receipt of an exemptive
order from the Securities and Exchange Commission or other satisfactory
resolution regarding the application of the 1940 Investment Company Act to
Vodafone AirTouch and AirTouch Communications, Inc.
Finance and Accounting
Bell Atlantic will consolidate the revenues and expenses of the new
wireless business into its financial results, and the transaction will be
accounted for as a purchase. Vodafone AirTouch will use equity accounting for
its interest, recognizing a proportionate share of the wireless enterprise's
results based on its ownership interest.
Vodafone AirTouch and Bell Atlantic have agreed to a dividend policy for
the first five years of the combined wireless business such that 70% of
adjusted net income (after payment of taxes but before deduction of goodwill
amortization), will be distributed as dividends provided that certain credit
ratios are maintained. After the five-year period, the board will evaluate
future dividend policies.
The new business will initially assume or incur up to $10 billion in
existing and new debt. Vodafone AirTouch's recourse debt is expected to
decline by $4.5 billion.
Vodafone AirTouch can elect to sell shares through an IPO in a company
formed to hold ownership interests in the wireless business at any time after
three years from the closing of the transaction. In addition, if Bell
Atlantic were to initiate an IPO (which it could do any time after the close),
Vodafone AirTouch will be entitled to pro rata participation.
Vodafone AirTouch can also choose to put up to $20 billion worth of its
interest to Bell Atlantic or the wireless business between three to seven
years from the closing of the transaction.
Merrill Lynch & Co., Inc. and Warburg Dillon Read acted as financial
advisors and provided fairness opinions to Bell Atlantic. Goldman, Sachs &
Co. acted as financial advisor and provided a fairness opinion to Vodafone
AirTouch. Chase Securities and Salomon Smith Barney acted as financial
advisors to GTE.
More details on the assets being contributed by the companies are included
in the attached table.
Bell Atlantic
Bell Atlantic is at the forefront of the new communications and
information industry. With more than 43 million telephone access lines and 10
million wireless customers world-wide, Bell Atlantic companies are premier
providers of advanced wireline voice and data services, market leader in
wireless services, and the world's largest publishers of directory
information. Bell Atlantic companies are also among the world's largest
investors in high-growth global communications markets, with operations and
investments in 23 countries.
Vodafone AirTouch
Vodafone AirTouch, based in the United Kingdom, is the world's largest
mobile telecommunications company. It has mobile operations in 23 countries on
five continents, with more than 28 million proportionate customers. Its
ventures cover a population of nearly 900 million people. In the United
States, Vodafone AirTouch serves 9 million proportionate cellular and PCS
customers in 24 states and 22 of the top 30 U.S. markets, including Atlanta,
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