Text of letter by Mr. Lee regarding merger proposal with MCI:
For more information contact:
Peter Thonis, 203/965-3326, GTE
Kathleen Lobb, 203/965-3236, GTE
George J. Lieb, 203/965-2462, GTE Investor Contact
GTE CORPORATION PROPOSES MERGER WITH MCI
IN TRANSACTION VALUED AT $28 BILLION
October 15, 1997
STAMFORD, Conn. - Charles R. Lee, Chairman and Chief Executive Officer of
GTE Corp., today sent a letter to Bert C. Roberts, Jr., Chairman of MCI
Communications Corporation, proposing to acquire MCI in a transaction valued at
approximately $28 billion in cash or $40.00 per share. The transaction, one of the
largest mergers ever proposed, would create an enterprise with more than $40
billion of combined revenues, more than 21 million local lines and more than 24
million long-distance lines, significant positions in every key area of the
telecommunications market, and a long-standing and continuing commitment to
bringing the benefits of telecommunications on a highly competitive basis to a broad
spectrum of residential and business customers. The transaction would also bring an
important relationship with British Telecommunications plc and BT's vision of global
telecommunications, which GTE shares.
The full text of Mr. Lee's letter to Mr. Roberts follows:
October 15, 1997
Mr. Bert C. Roberts, Jr.
Chairman
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, DC 20006
Dear Bert:
You and I have talked over the years about the advantages of bringing our two great
companies closer together. We both supported the historic Telecommunications Act
of 1996, which was designed to sweep away the antiquated separation of markets
by geographic and product-line boundaries and to empower companies to bring
robust competition to all telecommunications markets. As I survey our industry
today, I am more convinced than ever that the combination of our companies would
serve the best interests of our shareholders, employees, business partners, and
communities, and would achieve the vision of the Telecommunications Act by
creating a dynamic competitive force capable of bringing the benefits of competition
to all markets and all customers, both nationally and globally.
I am pleased, therefore, to propose that we combine GTE and MCI. Specifically,
we are offering $40.00 in cash per share of MCI stock. We would propose,
immediately upon execution of a definitive merger agreement, to launch a cash tender
offer for the MCI shares. To expedite delivery of consideration to your shareholders,
the shares would be accepted for payment, and deposited in a voting trust, upon the
receipt of Hart-Scott-Rodino and European antitrust approvals. We would acquire
the balance of the shares through a merger which we would be prepared to close as
soon as possible following the consummation of the tender offer.
I would like to meet with you as soon as possible and am looking forward to
negotiating the contemplated Merger Agreement expeditiously. To facilitate
discussions, a draft agreement is being forwarded to you under separate cover. Of
course, we recognize that any discussions must be consistent with any legal
restrictions you are under. Because I believe so strongly in the opportunities for our
combined enterprise, I am willing to explore, as an alternative to all cash, a
combination of cash and stock as payment for MCI shares.
We should explore how we can best combine our outstanding teams of employees.
I, and our senior team at GTE, would look forward to working with you to develop
a management structure for the new organization that includes you, your senior
leadership and others in your organization. We have respect and admiration for the
very special culture of your organization and are intent on ensuring that it thrives
within the new organization. In that regard, I would hope that upon completion of our
transaction, you would become a member of the new organization's Board of
Directors as a Vice Chairman, as well as joining Kent Foster, Mike Masin and me in
the Office of the Chairman. I, and the other directors, would also hope you would
join our Board's strategic planning committee. We, of course, are open to the
possibility of other members of your Board joining the new organization's Board. In
recognition of the importance to our new organization of MCI, its management and
its outstanding workforce, we intend the World Headquarters of the combined
organization to be located in Washington, DC in conjunction with MCI's current
World Headquarters.
The logic and vision of this merger are compelling. The combined enterprise would
be well-positioned to compete and grow by offering the broadest range of products
and services worldwide. It would generate over $40 billion of annual revenues; serve
more than 21 million local and 24 million long-distance lines, and 5 million wireless
customers; have a global presence in 77 countries; possess one of the world's most
advanced global data communications networks; and be led by a combined
management team and workforce second to none in our industry. Together, the
outstanding talents, capabilities and shared values of our two companies would
create a dynamic competitive force in the growing number of markets we serve.
As you know, GTE is committed to pursuit of the promise of the
Telecommunications Act. We have entered the long-distance market as a reseller.
Recently, we created a competitive local exchange carrier business largely in an
effort to attack and compete with the RBOCs in their service areas. Last May, we
announced a series of steps to position GTE as a market leader in data
communications, the fastest-growing segment of the telecommunications
marketplace. These steps included acquiring BBN, a leading provider of end-to-end
Internet solutions; establishing a strategic alliance with Cisco to jointly develop
enhanced data and Internet services; and purchasing a national, state-of-the-art fiber
optic network from Qwest. To serve international markets, we have increased our
stake in the Americas and established a significant presence in Asia.
Together, we can achieve the promise of the Telecommunications Act. The fit
between our companies is truly extraordinary. Indeed, no two companies in the
industry today are more complementary or better situated to expand the availability
and breadth of bundled service offerings to local, national and international
customers, and to penetrate those markets previously closed to us. GTE would bring
to the new company a local exchange business, including operational expertise and a
national, though dispersed, footprint, that provides an ideal platform from which the
combined company can launch competitive facilities-based service to compete with
the RBOCs. In addition, GTE would bring to the combination one of the nation's
largest wireless operations. MCI has demonstrated prowess and retailing acumen in
long distance and in serving the needs of large multinational business customers.
Moreover, the companies together can pursue aggressive, innovative strategies for
the data marketplace and begin competing in earnest for RBOC customers.
Both companies are committed to the global market. GTE currently has a presence
in 21 countries in four regions, and derives 15 percent of its net income from its
international business. MCI also has a significant global presence. We share the
global vision of our industry that brought MCI and British Telecom together and look
forward to discussing with you the continued development of that relationship within
the context of this proposal. In fact, realizing the growth opportunities represented by
the international marketplace would be another of our top strategic priorities,
including continuing to work closely with our respective international partners.
There are additional important aspects to combining our two companies that also
serve the public interest while enhancing shareholder value. Together, for example,
we would have the wherewithal to make the investments in infrastructure necessary
to foster innovation and job creation in our industry. We would deploy and operate
the advanced high-speed network infrastructures encouraged by the architects of the
Telecommunications Act. These networks would provide the solid foundation upon
which a wide range of entrepreneurial competitors will build their services. In fact,
the combined company would invest more than $8.5 billion annually in network
deployment. The benefits of these investments would accrue to all of our combined
and prospective customers. Our respective track records demonstrate that we have
always been committed to providing all of our services universally. That commitment
will not change. Indeed, combining MCI and GTE would enhance our ability to fulfill
it.
Our two companies, having both emerged outside the dominant AT&T/RBOC
structure, believe strongly in the public benefits of vigorous and fair competition, and
the transaction we propose is clearly pro-competitive. It would clearly create, in
both scale and scope, the most substantial facilities-based competitive alternative to
the RBOCs and bring to customers a full complement of communications services,
including local, long distance, wireless, Internet applications and video.
In addition, the merger of our two companies would result in significantly enhanced
operating efficiency as well as new revenue opportunities as we respond to
consumer preference for a complete array of products and services.
For these reasons, our legal advisors believe that we will be able to obtain the
regulatory approvals necessary to consummate this transaction. We have been
further informed by our financial advisors that any financing required to complete the
transaction would be readily available. Thus, we intend to consummate this
transaction in the same time frame as contemplated in the WorldCom proposal.
In short, Bert, my colleagues and I at GTE believe very strongly that a merger of
MCI and GTE is in the best interests of all of our respective shareholders,
customers, employees, and business partners. It would unite two of the world's great
telecommunications companies under a single roof while creating significant
long-term value for all of our constituencies. I am personally very excited about this
proposal - which we are prepared to discuss with you in detail immediately - and
I'm confident that after you have reviewed it, you and your colleagues will fully share
that enthusiasm.
Sincerely,
Charles R. Lee
About GTE
With revenues of more than $21 billion in 1996, GTE is one of the largest publicly
held telecommunications companies in the world. In the United States, GTE offers
local and wireless service in 29 states and long-distance in all 50 states. GTE was
the first among its peers to offer "one-stop shopping" for local, long-distance and
Internet access services. Outside the United States, where GTE has operated for
more than 40 years, the company serves approximately 7 million customers. GTE is
also a leader in government and defense communications systems and equipment,
directories and telecommunications-based information services, and
aircraft-passenger telecommunications.
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145(97)
FACT SHEET
GTE Corporation
GTE Corporation (NYSE:GTE), founded in 1918, is one of the largest publicly held
telecommunications companies in the world.
In the United States, GTE offers local and wireless service in 29 states and
long-distance service in all 50. GTE was among the first of its peers to offer
"one-stop shopping" for local, long-distance and Internet access service. In the U.S.,
GTE provides more than 21 million customer lines for local service alone.
Outside of the United States, the Company serves approximately 7 million
customers. GTE manages major telecommunications operations and provides a
broad array of these services through BC Telecom in British Columbia, Canada;
Quebec Telephone in Quebec, Canada; CODETEL in the Dominican Republic; and
CANTV in Venezeula. GTE also has cellular ventures in Argentina, Japan and
Taiwan, and provides paging services in China.
GTE is also a leader in government and defense communications systems and
equipment, directories and telecommunications-based information services, and
aircraft-passenger telecommunications.
1996 Revenues:
$21.3 billion
1996 Net Income:
$2.8 billion
Market capitalization:
$47 billion
Shares outstanding:
956 million
Employees:
102,000
Headquarters:
Stamford, CT
Chairman and CEO:
Charles R. Lee
President:
Kent B. Foster
Vice Chairman:
Michael T. Masin
Major physical locations (domestic):
Stamford, CT
Irving, TX
Atlanta, GA
Tampa, FL
Thousand Oaks, CA
Oak Brook, IL
Cambridge, MA
Waltham, MA
Needham, MA
Everett, WA
Honolulu, HI
Major physical locations (international):
British Columbia, Canada
Caracas, Venezuela
Santo Domingo, Dominican Republic
Buenos Aires, Argentina
Guangzhou, China
Quebec, Canada
MCI Communications Corporation
MCI Communications Corporation (NASDAQ:MCIC), founded in 1968, provides
a broad portfolio of communications services over one of the most advanced and
reliable global networks. The second-largest long distance carrier in the United
States, MCI also offers local, wireless and information technology services.
Internationally, MCI conducts operations in 70 countries.
1996 Revenues:
$18.5 billion
1996 Net Income:
$1.2 billion
Market capitalization:
$20 billion
Shares outstanding:
556 million
Employees:
55,000
Headquarters:
Washington, D.C.
Chairman:
Bert C. Roberts, Jr.
Chief Executive Officer:
Gerald H. Taylor
President and COO, MCI Telecommunications:
Timothy F. Price
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