Glancing Back, For The Journey Ahead
By Rikki Lee
It's nearly the end of another year–but where did the time go? You didn't squander it away; you were just too busy looking ahead
to cast a glance over your shoulder as the past shrank in your rear-view mirror.
Although something new kept you occupied–preparing for the Millennium Bug–the year in business wasn't much different from
the one before: a fever pitch of mergers, acquisitions, joint ventures, bankruptcies and spinoffs, plus a Wall Street roller-coaster of
new public offerings and stock prices spiraling up and down.
Still, it's good to remember the recent past, because you'll be reliving it in 2000 and beyond. The volatile business environment of
the last few years–and of the next few–signifies wireless' central role in the world economy and positions the industry's leading
players for precipitous growth ahead.
So, let's race down short-term-memory lane and re-examine the 20th century's last hurrahs in business, as originally chronicled in
Wireless Week.
Let's Make A Deal
Deals between wireless and other telecom carriers ranked among the highest priced of all mergers during the year. The most
aggressive acquisitors include MCI WorldCom Inc., Vodafone Group plc, VoiceStream Wireless, SBC Communications Inc. and
Arch Communications Group Inc.
The granddaddy pact was unarguably MCI WorldCom's historic $129 billion match-up with Sprint Corp. Many saw the merger as
a combination of the No. 2 and No. 3 long-distance carriers, but MCI WorldCom really wanted to create one enormous splash in
the deep end of the wireless pool. The telecom colossus, which served as a reseller for several years after ditching its wireless
holdings 13 years ago, will gain Sprint's nationwide PCS carrier.
After toying with a Nextel Communications Inc. merger, MCI WorldCom needed a wireless component as it strived to offer
one-stop telecom shopping. If it's approved, the merger will add Sprint PCS' voice and Wireless Web services to MCI
WorldCom's long-distance, Internet and broadband offerings. In fact, nearly $56 billion–or about half of the parent company's
selling price–will go toward the wireless side.
At the time, MCI WorldCom wasn't totally without wireless: The carrier also offers advanced messaging services after snatching
fellow Mississippi firm SkyTel Communications Inc. Although a connection between the two started as a rumor a few weeks
before with the mysterious registration of domain name “skytelworld
com.com,” the merger was finally announced last May. One of the early leaders of two-way messaging, SkyTel provided MCI
WorldCom with 1.4 million domestic customers.
Just don't expect smooth sailing for the MCI WorldCom-Sprint merger from the FCC and Congress. Last month, executives from
the two carriers addressed the Senate Judiciary Committee. They said the merger would bring competition to the local phone
market through their use of acquired multichannel multipoint distribution services spectrum. However, several committee members
said they'll withhold support until MCI WorldCom and Sprint demonstrate that the merged company won't harm consumers by
removing one major long-distance carrier.
And now the next big player steps up to bat: Vodafone. The U.K. operator began the year with a bold $62 billion bid for U.S.
carrier AirTouch Communications Inc., creating the beginnings of a global powerhouse. At the time of the mid-January
announcement, Vodafone CEO Chris Gent said, “Ultimately it will enable us to create a world telephone service based upon the
next generation of technical standards.”
The deal was completed last June, a lightning-fast transaction that met with minimum scrutiny from U.S. and European regulators.
After that, Gent didn't lose much time building up his world service. In July, Vodafone AirTouch agreed to pay $1.36 billion in
cash and debt for rural carrier CommNet Cellular Inc., which serves 360,000 customers in nine Western states.
That's not all. To increase its influence in the United States, Vodafone AirTouch in September signed an agreement to merge its
U.S. wireless properties with Bell Atlantic Corp.– which still waits on its merger with GTE Corp. and remains eager to pick up
properties from the PrimeCo Personal Communications LP venture. After the smoke clears, the new Bell Atlantic
Mobile-AirTouch Cellular/Paging-GTE Wireless-PrimeCo holdings will be the largest in the country, with more than 21 million
proportionate cellular/PCS and 3.5 million paging customers and covering 49 of the top 50 markets and 90 percent of the U.S.
population. The new company will be owned 55 percent by Bell Atlantic and 45 percent by Vodafone.
Last week, Bell Atlantic came closer to its goal after receiving the go-ahead from the Department of Justice. The companies will
dispose of overlapping wireless properties serving about 3 million customers in markets including San Francisco, San Diego,
Houston, San Antonio, Cleveland, Chicago and Seattle. The new venture still needs FCC approval.
When this new nationwide carrier enters the scene, it could spur intense marketing wars among competitors AT&T Wireless
Services, Sprint PCS and Nextel. Time will tell.
With the U.S. market in the process of being wrapped up, Vodafone turned its attention
toward Europe. In November, Vodafone eyed German telecom giant Mannesmann AG as a possible merger target. When talks
with Mannesmann CEO Klaus Esser collapsed, Gent launched a $128 billion hostile bid for the company. The offer was
immediately rebuked but as of last week Gent remained undaunted.
GSM Upheaval
Meanwhile, the GSM sector began to piece its national identity. When Western Wireless Corp. spun off its VoiceStream Wireless
PCS business last March, we somehow knew there'd be changes in the air. And those changes started in late June with
VoiceStream's daring $4.3 billion acquisition of Omnipoint Communications. About $957 million of that investment will come from
the U.S. subsidiary of Hutchison Telecommunications Ltd. of Hong Kong, which will own 30 percent of the new company.
But add to that VoiceStream $3 billion late-September stock deal with Aerial Communications, which operates in
Minneapolis/St.Paul, Pittsburgh, Houston, Kansas City, Mo., and other cities. With networks soon to run from Honolulu to New
York City to Miami, VoiceStream's celebrity spokeswoman Jamie Lee Curtis will be selling the brand coast to coast. The
company's systems will cover 22 of the top 25 markets–thanks in part to the addition of former GSM-challenged cities Dallas and
Chicago, which the carrier won in the PCS re-auction last spring.
And then there's SBC. With its May 1998 acquisition of Ameritech Corp. not yet completed, SBC in January made a bid for
Philadelphia's Comcast Cellular Communications Inc. This acquisition, worth about $1.67 billion, was designed to bolster SBC's
presence in the Northeast and serve as a complement to its SNET holdings in New England.
The most unexpected deal of all came in early November--SBC's purchase of privately held Radiofone Inc., the 41-year-old
carrier based in New Orleans and perhaps the last family-owned operator to serve a metropolitan area. “There shouldn't be
anything controversial” about this, said Larry Garvey, who founded the company in 1958 with brother Don. With this transaction,
which collects licenses in the New Orleans and Baton Rouge, La., SBC stormed BellSouth Mobility's beaches.
Even the sluggish paging industry has a premier acquisitor: Arch. The company stared down a last-minute attempt by TSR
Wireless to win the bankrupt MobileMedia Corp., a deal Arch completed last summer. After integrating the company successfully,
Arch found a new acquisition last month: the struggling PageNet. Although the No. 1 paging carrier in terms of customers,
PageNet lost about a million subscribers in a year, racked up nearly $2 billion in debt and saw its stock dip far below the $1 mark
and remain there.
The merger, expected to close in the first half of 2000, will create a messaging company with 16 million subscribers, almost three
times as many as Metrocall Inc., the nearest competitor. Commenting on the merger, Arch Chairman and CEO Ed Baker said,
“As we look out in the future and [see] opportunities and battlefronts, it's going to require companies with different balance sheets
and strengths than any of us have on our own today.”
Not a bad philosophy for the years ahead. |
