To all:
More feed for the rumor mill:
<<<EW YORK, July 28 (Reuters) - The latest merger deal between Bell Atlantic Corp. (NYSE:BEL) and GTE Corp. (NYSE:GTE) increased the frenetic pace of consolidation in the U.S. telecommunications industry and puts a spotlight on the remaining players, analysts said. BellSouth Corp. (NYSE:BLS), the Atlanta-based Baby Bell, and Sprint Corp. (NYSE:FON), are seen as the next potential takeover targets, along with emerging companies such as Level 3 Communications Inc. (NASDAQ:LVLT) and Qwest Communications International Inc. NASDAQ:QWST), analysts said.
"What's next? WorldCom plus a big RBOC (regional Bell operating company) and Sprint? BellSouth?...it's almost a question of who is left," said Christine Heckart, telecommunications analyst with TeleChoice. "BellSouth, in this environment, they can't stand on their own... they are totally entrenched between Bell Atlantic and Southwestern Bell. It will be almost impossible for them to compete on their own," Heckart said.
Shares of BellSouth traded near their 52-week high of 73-10/16 on Monday amid speculation they could be the next target. The stock fell 2-15/16 to 69-1/4 on Tuesday during broad weakness in the stock market and after Bell Atlantic won GTE's hand without paying a premium on GTE's stock price, some analysts said.
U S West Inc. (NYSE:USW), the Colorado-based Baby Bell, may not be in line for a merger for another two years because of recent split of its parent into a telephone operation and a cable television company.
The tax-free status of the U S West split would be lost if U S West pursued a pooling-of-interest merger with another company. U S West could still agree to a takeover, but its buyer would have to pay the tax penalty on U S West's earlier split. That hefty bill makes the chances of a U S West merger very slim, analysts said.
Other analysts said Bellsouth and U S West don't have to merge.
"They can continue to be very successful as stand alone companies. It's just a question of the size of the marketplace that they want to compete in," said Jeffrey Kagan of Kagan Telecom Associates.
"If they want to go head to head and compete on a national and global scale and be everything to everybody then they need to consider merging. If they are happy focusing on certain regions and global opportunities they can continue to thrive, just on a smaller scale than the titans who are several times their size," Kagan said.
The GTE-Bell Atlantic came on the heels of a $10 billion international telephone alliance struck over the weekend by AT&T Corp., the nation's largest phone company, and British Telecommunications Plc.
That deal puts pressure on Sprint to strengthen its GlobalOne partnership with Deutsche Telekom AG (FSE:DTEG) and France Telecom (SBF:FTE) or possibly seek an additional partner, analysts said.
Sprint has said in the past that it believes it can thrive on its own. But analysts expect the company would agree to a takeover for a high enough premium. Sprint is 20 percent owned by Deutsche Telekom AG (FSE:DTEG) and France Telecom (SBF:FTE). In February, those overseas partners surrendered their two-year "disapproval right" to veto any potential Sprint divestiture or merger.
Sprint could enter into a friendly deal with France Telecom and Deutsche Telekom, but partners are restricted for a decade from increasing their stake in Sprint without Sprint's approval.
Over the past nine months, the U.S. telecommunications industry has seen two Baby Bells, Ameritech Corp. (NYSE:AIT) and SBC Communications Inc. (NYSE:SBC), agree to merge in a $61 billion deal. Industry upstart WorldCom Inc. (NASDAQ:WCOM) made a surprise $37 billion bid for MCI Communications Corp. (NASDAQ:MCIC), wrestling the long-distance carrier away from BT.
AT&T also announced two deals to buy Teleport Communications Group Inc., which provides local telephone service to businesses, and Tele-Communications Inc. (NASDAQ:TCOMA), a huge cable television operator.
Copyright 1998, Reuters News Service >>>
Steve
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